Dangote: Africa Imports 120 Million Tons of Petroleum Products Every Year

Africa imports more than 120 million tonnes of refined petroleum products a year at a cost of over $90 billion due to the continent’s inadequate indigenous refining capability, according to Aliko Dangote, president and chief executive of Dangote Industries inadequate.

He was a speaker at the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and S&P Global Commodity Insights’ recent West African Refined Fuel Conference in Abuja.

He expressed regret that cheap, frequently dangerous petroleum products, many of which are blended to subpar levels that would not be allowed in North America or Europe, are increasingly finding their way to Africa.

He expressed gratitude to the management of the Nigerian National Petroleum Company Limited (NNPC) for supplying us with some cargoes of Nigerian crude from the beginning of production to the present. He disclosed that the company imports 9–10 million barrels of crude per month from the United States and other nations.

As of right now, we purchase between 9 and 10 million barrels of crude oil every month from the United States and other nations,” he stated. I must express my gratitude to NNPC for providing us with certain cargoes of Nigerian crude from the beginning of production to the present.

Africa produces approximately 7 million barrels of crude oil a day, but only about 40% of its 4.3 million barrels of processed goods are refined domestically, he said. Europe and Asia, on the other hand, refine more than 95% of their use.

Therefore, even though we produce a lot of crude oil, we import more than 120 million tons of refined petroleum products annually, which essentially means that we are bringing poverty and jobs to our continent. Regions with excess refining capacity are capturing a $90 billion market opportunity. Just 15% of African nations have a GDP of more than $90 billion, to put this into context. “Year after year, we are essentially giving away the economic potential of an entire continent to others,” he stated.

Dangote reaffirmed his faith in the strength of free markets and global collaboration, highlighting the need for trade to be based on comparative advantage and economic efficiency rather than at the price of safety or quality standards.

“Africa exporting raw crude only to re-import refined products—products we are more than capable of producing ourselves, closer to both source and consumption,” he emphasized, “defies logic and economic sense.”

He also outlined a number of difficulties encountered, such as commercial, technical, and contextual barriers particular to Africa.

Refineries like the Dangote Petroleum Refinery are among the most logistically challenging and capital-intensive industrial facilities ever built, he said.

He claimed that the Dangote refinery project needed to clear 2,735 hectares of land, 70% of which was swampy. In order to stabilize the site and raise it by 1.5 meters, 65 million cubic meters of sand had to be pumped, along with more than 250,000 foundation piles and millions of meters of electrical, plumbing, and cabling.

Over 67,000 people, including 50,000 Nigerians, were on-site at its height, working around the clock to coordinate across hundreds of specialties and countries. Naturally, the COVID-19 pandemic followed, which caused a two-year delay and added new degrees of risk, complexity, and disruption. However, we persisted,” he said.

Due to the inability of Nigerian ports to accommodate the size and amount of equipment needed for the refinery, a separate harbor had to be built.

This comprised 330 cranes, more than 2,500 pieces of heavy machinery, and even the construction of the biggest granite quarry in the world, which can produce 10 million tonnes of granite annually.

“To put it briefly, we created a whole industrial ecosystem from the ground up, not just a refinery,” he stated.

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Despite the refinery’s technical success, Dangote found major business obstacles, especially with regard to the sourcing of crude oil and exchange rates, which increased from N156/$ at the beginning to N1,600/$ at the end. The refinery has had trouble obtaining oil at competitive prices, despite Nigeria’s reportedly daily production of around 2 million barrels.

“We had to deal with foreign trading companies that were purchasing Nigerian crude and reselling it to us—with significant premiums, of course—instead of purchasing crude oil directly from Nigerian producers at competitive terms.”

Bottlenecks in logistics and regulations have also had an impact. According to reports, port and regulatory fees make about 40% of the total cost of freight and can occasionally be two-thirds as expensive as the vessel’s charter.

“Because they are not subject to excessive port fees, refiners in India, who buy crude oil from even more distant regions, enjoy lower freight costs than we do right here in West Africa,” Dangote stated.

He went on to say that because customers pay at the point of loading as well as the point of discharge, loading a domestic cargo of petroleum products from the Dangote Refinery is currently more expensive in terms of port charges. On the other hand, they only pay at the point of discharge when they load from Lomé, a competitor.