An Assessment of Dangote’s Oil Refining Plans

The information that Alhaji Aliko Dangote, the richest man in Africa has determined to take the bull by way of the horns and make investments within the unstable oil refining enterprise can only be met with an positive reaction. Especially from more than 90% of the Nigerian populace who’ve these days been made to bear the brunt of high fuel charges due to the arguable removal of subsidy on imported petrol merchandise.

Dangote is already an completed businessman with a number of monetary muscle; and albeit the jury continues to be out on his near courting with the existing and beyond governments coupled with his potential to ruthlessly monopolize the industries he invests in, we cannot definitely dismiss his contribution to the Nigerian economy inside the regions of task introduction and the availability of regionally produced commodities with out us having to rely on imported substitutes. In the place of competition, we absolutely can not blame him for the signs and symptoms of monopoly we discover in his regions of business interest, the duty lies with the government whose obligation is to protect the hobby and welfare of clients via selling opposition and prevent the abuse of monopoly energy.

The Nigerian billionaire plans to construct an $8 billion refinery so as to produce 400,000 barrels according to day by the stop of 2016. Currently, we are best capable of produce underneath the 445,000 barrel in line with day mark through the mixed efforts of our four refineries in Port Harcourt, Kaduna and Warri. However, the EIA states that the operational ability of those four refineries averaged most effective 24% in 2011. According to OPEC, our neighborhood oil intake stands at 267,000 barrels in line with day because of this that the proposed refinery can have the capability to cater for our home consumption needs and still have widespread surplus to export to neighboring countries.

Obviously, this is not thinking of the plans with the aid of the federal government to assemble three Greenfield refineries in Lagos, Kogi advert Bayelsa to be in operation via 2017 and the refurbishment of the prevailing infrastructure. If we’re capable of get this proper, Nigeria can easily turn out to be a internet exporter of refined petroleum products in ten years. That is however a large “if” taking into account the myriad of things presently plaguing the industry.

Potential benefits to the Nigerian Economy

Refineries are high priced to preserve, they require top elegance management within the fingers of skilled experts who’re aware about the numerous operational and financial risks encountered of their everyday strolling. This is where we’re failing and it has furnished the proper platform for saboteurs to ensure none of the present refineries paintings at full capability. This has led the u . S . To rely closely on uploading delicate petroleum merchandise; a pass which has been fairly useful to three robust parties.

Nigerian news headline today the Jinx

If Dangote can correctly pull this off, it’s going to immediately quell the parable that we will by no means get our refineries working at full potential or that we can not refine one hundred% of the oil we want for home consumption. As many stakeholders have argued, this could also strengthen the fact that the personal region has a key position to play in fixing key macroeconomic issues within the usa.

Competition

Few palms can compete with Dangote in his commodity refining and importation business industries which he has efficiently ended up monopolizing. However, the oil and fuel sector is a different ball game as there are many skilled employees and fascinated parties inside the quarter who also can come collectively as bold forces. They additionally have technical information and economic wherewithal to draw and accomplice with overseas traders in investing in petroleum refining inside the united states of america. The burgeoning host of indigenous energy agencies inside the united states of america could be trying to leverage on the refining business if this circulate pulls through. According to Forbes, Nigerian Abdul-Samad Rabiu is already constructing a $500 million cement plant in Edo nation to rival Dangote cement. This gives us a touch of how successful and particularly profitable groups can encourage opposition to be able to automatically lead to task introduction.

Cost effectiveness and Job advent

This development has the ability of benefitting from economies of scale given the proposed capacity of the refinery. Depending on how law and different factors work out, we should discover ourselves refining oil at a miles cheaper price so one can put a critical dent to the prospect of uploading petrol from foreign refineries. If the constituted authorities can be muster the braveness to guide this, this can spell the give up of an technology of large corruption and rent searching for conduct witnessed by means of the parties profiting from the importation of subtle petroleum merchandise. With greater transparency, this will also in the long run lead to the discount in pump fees in the long run if we recollect how we would be casting off the transportation cost of exporting the crude and importing the finished product which is a key element of the pricing version. As this can drive the creation of some other profitable and engaging enterprise in Nigeria, we need to be looking at possibilities of job introduction and acquisition of key skill units and competencies on this important place of the downstream zone. It has already been mooted that over 2,000 jobs may be created and this variety can most effective develop through capacity spin-offs and similarly funding.

Challenges

We are eagerly ready to peer how the Nigerian authorities will react to this development given its failure to remedy the problems plaguing our present oil refineries for many years now costing the u . S . Trillions of naira. A lot of Nigerians could be keeping tabs in this improvement and it is logical to suggest that giving his cordial relationship with the authorities, Dangote would possibly simply be the person to open the flood gates and assist reduce the bottlenecks associated with licensing and other regulatory necessities. It may also be thrilling to peer how the oil importers and power brokers will reply to this considering the might of the opposition they will be dealing with this time. Dangote has all of the ingredients to survive this warfare as he has friends in high locations and also is aware of his politics in a risky enterprise surroundings like Nigeria.

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