A few days ago, news broke out that the Nigerian National Petroleum Corporation (NNPC) has moved to acquire 20 per cent stake in the 650,000 barrels per day from Dangote Refinery in Lagos.
The corporation in a follow-up statement signed by its Group General Manager Group Public Affairs Division, Dr Kennie Obateru explained that the move was in line with the Federal Government’s policy to ensure energy security for the country.
The statement from NNPC revealed that there is “a Federal Government policy directive which stipulates the mandatory participation of the Corporation in any privately-owned refinery that exceeds 50,000 barrels per day capacity in keeping with its statutory role of safeguarding national energy security”.
Obateru stated that NNPC has identified at least six refinery projects in which it intends to seek equity participation, five of which are at the development stage with the Dangote Refinery being the largest of them.
He explained that NNPC, “the National Oil Company of Nigeria primarily has a dual role of providing stewardship for the nation’s hydrocarbon resources and adding value to the resources for the benefit of all Nigerians and other stakeholders.”
Observers are deeply divided about the benefits this will attract to the nation’s government and her people considering the organisation NNPC would be partnering with.
Those commending this move emphasise that Nigeria stands to benefits immensely from the establishment of the refinery in the area of technology, employment, generation of power, local capacity development, production of petrochemicals, and increased demand for domestic crude, as well as unhindered availability of the product.
A seasoned online analyst, Chris Paul, in his analysis on the gains of this buy-in, opines that what the Dangote Refinery could make even from the sales of fuel alone, if they choose to run it with the interest of Nigerians at heart, would yield huge profit.
According to Paul, “About 159 litres of premium motor spirit (PMS) can be generated from a barrel of crude oil. Take note that the domestic need of Nigeria has been placed at 50 million litres of petrol daily. Dangote Refinery has the capacity to refine 650,000 barrels per day.
“650,000 barrels of crude oil x 159 litres of petrol = 103,350,000 litres of petrol. Subtract the domestic need of 50 million litres and you are left with over 53 million litres for export.
“Now, if Dangote decides to have pity on Nigerians or NNPC says this 20 per cent stake is given in the form of crude oil supply to the refinery in order to get Dangote to sell fuel to Nigerians at, say, N50 per litre of petrol; 50 million litres of petrol x N50 = N2,500,000,000 gross revenue daily for the refinery. Multiplied by 30 days, Dangote will be making N75 billion monthly. Per year, the facility will gross no less than N900 billion.”
Also, note that importing petroleum products creams off over 50 per cent of Nigeria’s foreign exchange revenue; which has played a major role in devaluing the naira to the state it is in at the moment.
So, with a Dangote Refinery coming into operation, it is likely that the naira may, at its worst, bounce back to an average of N100 to $1. This can happen within the first six months of optimal operation by the world’s largest refinery.
As perfect as this appears on paper, many other commentators are still not comfortable with such a partnership with a group whose main policy, is seen as a rabid desire to perpetually operate as a monopoly.
From various antecedents, wherever there is competition, Dangote would either cop-out or try to influence the business rules in his favour using his high-wired connections.
Read Also: OPEC: Dangote Refinery May Increase Pressure on Existing Plants
In 2016, Dansa, Dangote’s fruit juice company disappeared from the stands because of intense competition in the fruit juice market. The company claimed it wasn’t making any profit.
Dangote also started a $13 million tomato processing plant in 2016 and packed up again the following year. This still happened even after they spent about $3million to set up a greenhouse farm. The company listed the causes to include “massive smuggling and importation of tomato paste; the shortfall in the supply of fresh tomatoes; and power failure.” Interestingly these situations existed before they ventured into the business so why did they not factor them in their feasibility and viability studies?
In November 2017, they also closed down Dangote Noodles because they could not compete with Indomie in the market. In the company’s words, they wanted to “focus on pasta and flour.” The Group Head later sold the noodles factory to his biggest rival, Dufil, makers of Indomie.
Even Dangote’s “commitment to flour” after moving from noodles could not stand as his Dangote Flour was acquired by Olam in 2019. This year, Dangote Sugar wrote a petition against BUA Sugar, asking the Federal Government to place trade sanctions on BUA for “undermining the National Sugar Master Plan.” Some observers saw it as a clear plan to tilt the competition in his favour again by grounding BUA. Even BUA claimed their organisation was being blackmailed because they refused to hike sugar prices at Ramadan as Dangote did.
Observers who have equally grown suspicious reason that a company that would refuse to sell her noodles because of Indomie; or couldn’t sell flour because of Honeywell, as well as her tomato paste because of Derika, would definitely capitalise on opportunities where government policies will always tilt in their favour, while competitors would be edged out.
Like one observer opined, “I will not be shocked if, after a year or two, the government will hand over all the refineries to Dangote as part of this deal, thus making him the ‘Fuel emperor’ of West Africa”.
Similarly, a good number of people reason that all of these do not hold water given the fact that there are at least six refinery projects in which NNPC also intends to seek equity participation.
Whatever happens, Nigerians can take solace in the fact that the new vision will grow domestic refining capacity, improve petroleum products supply from our local refineries, and Nigeria will become a net exporter of petroleum products.
No matter who makes the highest gain, if Nigeria becomes a net exporter of petroleum products, the country’s economy will definitely receive a major boost.
