Nigeria’s $20 billion Dangote oil refinery has commenced gasoline supply to the local market, marking a significant shift in the country’s fuel landscape. Owner Aliko Dangote announced that this development aims to end the billions spent on fuel imports, which have strained the naira and contributed to economic instability.
The refinery, with a capacity of 650,000 barrels per day, began processing naphtha and jet fuel in January and is expected to reach full capacity by the end of the year. Analysts suggest that once fully operational, the refinery could disrupt European gasoline exports to Africa.
Dangote highlighted that the refinery will reduce Nigeria’s demand for foreign currency, which has been exacerbated by the high costs of importing petroleum products. He estimated that this initiative could stabilize the naira by removing about 40% of the demand for dollars in the market.
In the first quarter of 2024, gasoline imports accounted for 20% of Nigeria’s total imports, leading to a second currency devaluation earlier this year. As part of ongoing economic reforms, President Bola Tinubu has cut petrol and electricity subsidies and devalued the naira to align official and parallel market rates.
The Dangote refinery plans to supply 25 million liters of gasoline daily this month, increasing to 30 million liters by October. Following this announcement, the state oil firm NNPC raised gasoline prices from an average of 617 naira ($0.3942) to 855 naira per liter, reflecting a reduction in government subsidies.
While the refinery’s operations are expected to alleviate fuel shortages and long queues experienced since July, its success will depend on securing a consistent supply of feedstock. The Nigerian government has committed to selling crude to the refinery in local currency to ensure this supply.