Business is booming.

How Dangote Refinery will affect Nigerian
economy and energy supply

Yemi Olakitan

The Nigerian economy’s energy issues could have
been avoided if Dangote Refinery’s first products
had been released in 2022 as scheduled.

Energy poverty in Nigeria has remained unsolved.
Premium Motor Spirit and Electric Power deficits
have underpinned the year-after-year collapse of
key fiscal and monetary tools. Aviation fuel and
diesel have joined Nigeria’s petroleum supply

shortage. The Nigerian aviation industry nearly
collapsed last year due to an unexpected jet-fuel
price increase and shortage. Diesel’s similarity to
jet-fuel drove some small and medium-sized
businesses out of business and raised hotel,
banking, and other service costs. Nigeria’s energy
prognosis in 2023 and beyond is bleak because
these vital petroleum products have not increased
in availability. More so since the basic forces driving
the price of these petroleum products are rising
against the limited supply stance. Energy
production and consumption depend on
population, level of life, technology, energy
intensity, energy efficiency, climate change,
government policies, and financial markets.
Nigeria’s energy situation is rapidly shifting. Thus,
the Dangote Refinery or another should be made
available immediately.

The Dangote Refinery is economically,
technologically, geographically, and temporally
ready to solve Nigeria’s petroleum product issues.
The distilling column is the first hopeful sight if you
visit. It’s 112.5 metres tall, making it the world’s
tallest, according to global industry experts. Size?
Yes. Oil and gas engineers say tall columns have
improved efficiency, precision component
separation, and throughput.

The distilling column and Nelson Complexity Index
of the Dangote Refinery are impressive (NCI). An oil
refinery’s sophistication and ability to make a
variety of petroleum products from a barrel of oil is
measured by the NCI. This setup lets the refiner
make economically worthwhile products from light
to heavy for captive or designated markets.
According to the Oil & Gas Journal, the NCI ranges
from 1 to 20, with low numbers indicating simple
refineries and fuel. The greater the number, the
more goods the refinery can deliver, from heavy to
light. Marples, R. E. (2000) reports that the Dangote

Refinery has a global NCI of 10.5—higher than the
US average of 9.5 and Europe’s average of 6.5.

The refinery would conduct important refining
operations from the fundamental NCI Crude
Distillation Unit operation to multiple Residue Fluid
Catalytic Cracking (RFCC) upgrading technologies
with a 3,000-ton regenerator, the world’s heaviest
regenerator, according to Odeleye, Femi (2019).
Expected output meets all Nigerian petroleum
liquid needs in volume, quality, and accessibility.

The complexity index design of this refinery allows
it to operate five processing units and upgrade the
sixth unit, the catalytic unit, into four components:
hydro refining, reforming, cracking, and
hydrocracking. In addition to distillation, asphalt,
vacuum distillation, thermal processes,
alkylation/polymerize, and oxygenates. Light
petroleum products with components as low as C7
down to C4—methane, ethane, propane, butane,

hexane, heptane, octane—will flow abundantly,
including Nigeria’s wonderful Petroleum Gas,
Liquified Petroleum Gas, and dreaded Premium
Motor Spirit. The refinery’s middle column produces
all C8–C15 jet fuels. Jet A-1, Jet B, and JP-4 are
examples. The column compounds from C13 to C25
offer the much-needed diesel, whose pump price
rose from 350/litre in March 2022 to above
800/litre. The refinery replaces imported paraffin
wax, petroleum jelly, vaseline, motor oil, asphalt,
bitumen, and tar with heavier oils C25 to C70 and
column residue C70 to C900. This refinery’s
refluxing and reboiling fix product overlap that
lowers product quality.

This facility will handle Premium Motor Spirit supply
challenges such scarcity, adulteration, and the
overheated/never-ending subsidy crisis. Since last
year, aviation and diesel fuels for domestic trade
have struggled to secure sustainable, sufficient, and
economically feasible supplies. Bitumen and tar
imports have increased for construction activities in

the last five years. This shows Nigeria’s growing
petroleum product needs. A viable refinery of this
technology and economics is now more important
than ever for the Nigerian Energy Market.

This refinery helps the Fiscal and Monetary
Authorities formulate and implement policies to
improve foreign trade balance and protect local

The National Bureau of Statistics (NBS) reports that
in Q3 2022, other oil products accounted for
28.10% of total imports at 1.615 trillion. NBS data
show a 9.11% growth from Q2, 2022’s 1.480 trillion.
In 2022, Nigeria may import 6.2 trillion other
petroleum products. Other goods could be crude oil
exchange products NBS missed.

The Dangote refinery’s earlier delivery of these
items would have improved the country’s
international trade balance by 6.2 trillion or 28.10

percent in 2022. Economists say trade surpluses
boost GDP (GDP). Thus, the spending approach of
computing GDP includes the balance of trade (GDP).
The US Department of Commerce follows this
economic theory from the American Bureau of
Economic Analysis.

Even though the Dangote Refinery Gate Price is not
projected to be priced in Naira, the foreign
exchange savings will significantly reduce the
Central Monetary Authority’s responsibility to
safeguard the Naira. Before under/over recovery
administration, PMS landing cost foreign exchange
components are extracted. These include freight
charges, traders margin of US$10/30,000mt, Ship-
ship charges, receipt losses of 0.3 percent, NPA
$28,000 per day demurrage after 10 days allowed,
$10.5/mt NPA handling charges, stock finance for
imported items, US$2.50/mt, and lithering
expenditures. Researchers found that these
components make roughly 27% of the pump price
of any petroleum product. This amounts to N1.674

trillion sent to the foreign currency market to
acquire foreign exchange for imported petroleum
products that a domestic refinery would have

The Dangote refinery is expected to cut foreign
exchange demand by $3.857 billion in needless
import costs by producing 50 million litres PMS and
17 million diesel and aviation fuel per day. The
PPPRA landing cost template, NBS quarterly
petroleum product import, and CBN average official
exchange rate determine this. This refinery boosts
Nigeria’s economy by creating 135,000 permanent
jobs and displacing plastics imports. This refinery
will turbo-charge the Nigerian economy, unlock its
development, and overcome external and domestic
headwinds against fiscal and monetary instruments.

The refinery will show how poor petroleum industry
management has hurt Nigeria’s economy since the
civil war. Poor PMS management has hurt every
firm (large, medium, small, and micro), corporate,

institutional, and individual desire, and every well-
intentioned government initiative.

Since the Central Monetary Authority has borne the
greatest burden of foreign exchange in terms of
avoidable pressure on the Naira, it is only fair to
give credit to the current management of the
Central Bank of Nigeria under Godwin Emifiele for
policies like diaspora remittances and the recent
race to $200 billion initiatives that have clearly
helped in holding the Naira below N1000/US$ at the
black market today.

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