An Assessment of Dangote's Oil Refining Plans

The news that Alhaji Aliko Dangote, the richest guy in Africa has determined to take the bull by using the horns and make investments inside the risky oil refining business can most effective be met with an constructive reaction. Especially from extra than 90% of the Nigerian populace who have these days been made to endure the brunt of excessive gas charges due to the arguable removal of subsidy on imported petrol products.

Dangote is already an achieved businessman with lots of monetary muscle; and admittedly the jury is still out on his near courting with the existing and beyond governments coupled along with his capability to ruthlessly monopolize the industries he invests in, we cannot definitely brush aside his contribution to the Nigerian economy in the areas of task creation and the provision of regionally produced commodities without us having to depend upon imported substitutes. In the location of opposition, we clearly can not blame him for the signs and symptoms of monopoly we discover in his areas of commercial enterprise hobby, the duty lies with the authorities whose responsibility is to protect the interest and welfare of clients through selling competition and prevent the abuse of monopoly energy.

The Nigerian billionaire plans to build an $8 billion refinery a good way to produce 400,000 barrels in step with day via the end of 2016. Currently, we're best able to produce under the 445,000 barrel in line with day mark through the combined efforts of our four refineries in Port Harcourt, Kaduna and Warri. However, the EIA states that the operational potential of those four refineries averaged only 24% in 2011. According to OPEC, our local oil intake stands at 267,000 barrels in step with day which means that that the proposed refinery can have the capacity to cater for our home consumption desires and now have significant surplus to export to neighboring countries.

Obviously, this is not deliberating the plans by using the federal government to assemble 3 Greenfield refineries in Lagos, Kogi advert Bayelsa to be in operation by 2017 and the refurbishment of the existing infrastructure. If we're capable of get this right, Nigeria can effortlessly become a net exporter of refined petroleum merchandise in ten years. That is but a large "if" deliberating the myriad of factors currently plaguing the industry.

Potential advantages to the Nigerian Economy

Refineries are steeply-priced to maintain, they require pinnacle magnificence control within the fingers of skilled experts who are aware about the numerous operational and financial risks encountered in their day to day jogging. This is wherein we are failing and it has supplied the right platform for saboteurs to make sure none of the prevailing refineries paintings at full capacity. This has led the united states of america to depend closely on uploading delicate petroleum products; a pass which has been distinctly useful to 3 strong events.

Breaking the Jinx

If Dangote can efficiently pull this off, it's going to without delay quell the parable that we can by no means get our refineries working at full capability or that we can't refine 100% of the oil we need for domestic consumption. As many stakeholders have argued, this can also fortify the truth that the non-public sector has a key function to play in fixing key macroeconomic troubles within the united states of america.

Competition

Few palms can compete with Dangote in his commodity refining and importation commercial enterprise industries which he has successfully ended up monopolizing. However, the oil and gasoline zone is a specific ball game as there are numerous skilled employees and fascinated parties within the zone who can also come collectively as formidable forces. They additionally have technical know-how and financial wherewithal to draw and partner with foreign buyers in making an investment in petroleum refining in the united states. The burgeoning host of indigenous power businesses within the u . S . May be trying to leverage on the refining business if this pass pulls through. According to Forbes, Nigerian Abdul-Samad Rabiu is already constructing a $500 million cement plant in Edo kingdom to rival Dangote cement. This offers us a hint of the way a hit and notably rewarding businesses can inspire opposition in order to routinely cause process advent.

Cost effectiveness and Job advent

This improvement has the ability of benefitting from economies of scale given the proposed capability of the refinery. Depending on how law and different elements training session, we may want to locate ourselves refining oil at a much inexpensive price so that it will positioned a severe dent to the prospect of importing petrol from foreign refineries. If the constituted authorities can be muster the braveness to assist this, this may spell the quit of an generation of big corruption and hire in search of conduct witnessed by way of the parties cashing in on the importation of delicate petroleum products. With extra transparency, this could additionally ultimately lead to the reduction in pump prices in the end if we consider how we'd be putting off the transportation fee of exporting the crude and importing the completed product which is a key issue of the pricing version. As this can pressure the advent of any other profitable and engaging enterprise in Nigeria, we ought to be looking at potentialities of activity advent and acquisition of key ability sets and abilties in this vital place of the downstream area. It has already been mooted that over 2,000 jobs will be created and this variety can only develop via potential spin-offs and further funding.

Challenges

We are eagerly waiting to see how the Nigerian authorities will react to this improvement given its failure to remedy the problems plaguing our existing oil refineries for decades now costing the u . S . A . Trillions of naira. A lot of Nigerians will be retaining tabs in this development and it is logical to indicate that giving his cordial relationship with the government, Dangote would possibly simply be the man to open the flood gates and help reduce the bottlenecks related to licensing and different regulatory requirements. It can also be interesting to peer how the oil importers and strength brokers will reply to this considering the may of the opposition they will be dealing with this time. Dangote has all the components to continue to exist this war as he has friends in excessive places and also knows his politics in a risky commercial enterprise surroundings like Nigeria.

Pricing may also be an interesting problem because the initial cost outlay of this undertaking and other elements would possibly prevent us from straight away benefitting from a reduced pump rate. It may also be exciting to peer the role the NNPC will play considering its affiliation with the International Oil Companies inside the area of deliver and also the PPPRA with regards to setting expenses. The subsequent five years might be an interesting one. Fingers crossed.