Fiona Nanna, ForeMedia News

5 minutes read. Updated 3:00PM GMT Tues, 17 September, 2024

The much-anticipated Dangote Refinery has officially commenced gasoline sales to Nigeria’s domestic market, marking a significant milestone in the country’s energy landscape. The refinery, boasting a capacity of 650,000 barrels per day (b/d), sold its first batch of gasoline domestically, with the Nigerian National Petroleum Corporation (NNPC) as the exclusive buyer for September. This development is expected to reduce Nigeria’s reliance on imported fuel, a long-standing issue for the oil-rich nation.

Details of the Initial Transaction

For September deliveries, NNPC has agreed to purchase gasoline from Dangote in US dollars. However, starting from October, a crude-for-gasoline swap arrangement will be introduced, with the settlement in Nigeria’s local currency, the naira. This swap system is expected to streamline transactions and further integrate Dangote’s operations into Nigeria’s broader economic framework.

The ex-refinery price for gasoline has been set at $736 per tonne, translating to 898.78 naira per litre, which is approximately $0.55/litre. Consumers in Lagos are already experiencing a retail price of N950.22 per litre, a figure that reflects recent price hikes following the Nigerian government’s reduction of fuel subsidies. The pricing of gasoline, under Nigeria’s Petroleum Industry Act, is negotiated directly between Dangote and NNPC, showcasing a shift towards more market-driven mechanisms.

Relieving Nigeria’s Import Dependence

Historically, NNPC has depended heavily on imported gasoline to meet Nigeria’s domestic fuel demand. This reliance has created vulnerabilities in the nation’s energy security, leading to periodic fuel shortages and price volatility. With the Dangote Refinery now coming online, expectations are high that the local production will ease this dependency, improving supply consistency and reducing the costs and risks associated with imports.

Despite this progress, the refinery is still in the process of ramping up its production. Over the past weekend, it supplied 16 million litres of gasoline, which falls significantly short of its full daily capacity of 57 million litres. Full-scale operations are projected to begin by October or November, once the refinery’s residual fluid catalytic cracker (RFCC) becomes fully operational.

The Future Outlook

Looking ahead, NNPC will supply Dangote with 385,000 b/d of crude oil starting in October, securing a consistent feedstock for the refinery’s operations. Under the current agreement, gasoline production will continue to be sold exclusively to NNPC for domestic distribution. However, the refinery’s production capabilities extend beyond gasoline. Diesel, which is also in high demand, will be available to other buyers, diversifying Dangote’s market reach.

The launch of gasoline sales by Dangote Refinery is seen as a positive step towards boosting Nigeria’s self-sufficiency in fuel production. With the full completion of the refinery, Nigeria is expected to see a significant transformation in its energy sector, both in terms of cost and availability. However, industry analysts remain cautious, noting that the full impact of the refinery will only be felt once it is running at its full capacity.

This move has been welcomed by economic observers, who believe that increasing domestic fuel production will help stabilize prices and reduce the strain on Nigeria’s foreign exchange reserves, which have been depleted due to years of fuel imports.