Dangote Refinery: A timely win for industrialization
By Abiodun Alade
Nigeria, rich in resources and with a burgeoning young population, remains paradoxically stagnant due to its over-reliance on imports. This dependency, rather than being a temporary measure, has entrenched itself as a systemic barrier to long-term prosperity.
With a population exceeding 200 million and a predominantly young demographic, Nigeria has become a prime target for global product dumping. Each year, a flood of new products enters the Nigerian market, to the point where the country imports nearly everything imaginable. This has created a mindset where locally produced goods are often perceived as inferior compared to imported items.
As one writer aptly observes, Nigeria imports toothpicks despite having bamboo, starch even though it is the world’s largest cassava producer, and tomatoes while having its own tomato production base. For nearly thirty years, Nigeria relied on imported refined petroleum products despite being a major crude oil producer with four refineries.
However, this narrative changed a few days ago with the production of gasoline (petrol) from the Dangote Petroleum Refinery and Petrochemicals, owned by Africa’s wealthiest entrepreneur, Aliko Dangote. This landmark facility, recognised as the world’s largest single-train refinery with a capacity of 650,000 barrels per day, also produces diesel, aviation fuel, and other products.
This marks a significant victory for industrialisation in Nigeria and serves as a powerful example of how Africa can break free from the cycle of being a dumping ground for foreign goods. It is striking to note that only Algeria and Libya out of the 54 countries in Africa do not import fuel, highlighting the transformative impact of this development.
By harnessing Africa’s abundant crude oil resources to produce refined products locally, Dangote aims to catalyse a virtuous cycle of industrial development, job creation, and economic prosperity.
In Nigeria, the refinery will significantly reduce fuel imports, save foreign exchange, and will contribute to stabilising the naira, lowering inflation, and reducing the cost of living among others. The refinery would lead to the protection of forex revenue of around $20bn a year at current market prices and saving of $14bn a year through domestic supplies of petroleum products. It would also create a minimum of 100,000 indirect employment through retail outlets and ease availability of petroleum products in the country.
Beyond its role in petroleum refining, the Dangote Refinery also represents a significant boost to Nigeria’s industrial and manufacturing sectors. It will produce crucial petrochemicals such as polypropylene, polyethylene, base oil, and linear alkylbenzenes that will grow many sectors, including the agricultural sector.
Previously, some players in the packaging industry had to shut down due to the difficulty in accessing foreign exchange to import polypropylene. This issue is expected to become a thing of the past as Dangote proudly declared on Tuesday: “We are committed to ensuring that starting in October, there will be no need to import polypropylene. Our petrochemical plant will be fully capable of meeting all local demands.”
The availability of these raw materials is set to revive related sectors and industries that had nearly vanished due to the prohibitive costs of importation. While importation provides immediate, short-term gains, it rarely supports sustainable growth. In contrast, industrialisation fosters long-term economic development by creating jobs, boosting productivity, driving innovation, and improving infrastructure.
In recent years, the impact of substandard fuel imports has been catastrophic. In 2022, poor-quality fuels damaged vehicles, generators, and machinery, leading to health crises, including cancer cases. The halt of these imports, achieved through interventions from Belgium and the Netherlands, is only a temporary reprieve as new routes for these harmful products were found, thereby continuing to inflict damage on Nigerians.
However, Nigerians can now breathe a sigh of relief, as the Dangote Oil Refinery will deliver refined products meeting the Euro-V standard, the highest quality in fuel. This level of excellence would have been unattainable through importation; under such circumstances, the best available would likely remain subpar.
As Nigeria contemplates her future, the lessons from industrialised nations are instructive. Nations like China, Japan, Taiwan and South Korea have experienced significant growth through industrialisation. These nations have demonstrated that investing in and protecting domestic industries, rather than reliance on imports, is a pathway to sustained development and global competitiveness.
The transition from a trading company focused on importing bulk commodities to a diversified conglomerate over the last two decades has enabled Dangote Industries Limited to significantly boost the economy and champion Africa’s drive for self-sufficiency. This evolution illustrates a vision that other stakeholders, including the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), should consider.
I was concerned when DAPPMAN, in a letter to President Bola Tinubu, expressed worries about financial losses incurred by its members due to Dangote Refinery’s decision to reduce the price of Automotive Gas Oil (diesel) from N1,700 to N900 upon starting production in January. The association said that players in the downstream petroleum sector have invested over N3 trillion in establishing around 130 private petroleum depots. Such an amount could turn around some manufacturing sectors, instead of serving as infrastructure for importation.
I believe that DAPPMAN and other Nigerians should mobilise resources to support the government in developing the manufacturing sectors of the economy. This is the most effective way to accelerate Nigeria’s development, reduce unemployment, and address insecurity.
Nigeria’s path to progress lies in embracing industrialisation. By investing in local industries and fostering a climate conducive to growth, Nigeria can unlock its potential and secure a prosperous future for its citizens. The time has come to shift from a reliance on imports to a focus on nurturing and expanding domestic industries. This transformation is not only feasible but essential for Nigeria’s development.
Abiodun writes from Lagos
