Nigeria's Dangote refinery starts producing gasoline

Nigeria's 650,000 b/d Dangote refinery has started producing gasoline, an important milestone for a country that has long been reliant on imports to meet its road fuel demand.

It will not only transform the Nigerian gasoline market but the broader market across sub-Saharan Africa, Dangote Group's chief executive Aliko Dangote told local TV network Arise News today. The quality of the gasoline matches specifications in the US, he said, without elaborating.

The start of gasoline output from Nigeria's newest and largest refinery coincides with an agreement between Dangote and state-owned oil producer NNPC. The exact terms have not been made public, but Nigeria's downstream regulator NMDPRA said Dangote will initially supply 25mn litres/d (160,000 b/d) of gasoline to the domestic market in September, rising to 30mn l/d from October, and that NNPC will start selling crude to Dangote in local currency rather than in dollars. NMDPRA did not specify when the crude sales in naira will begin, but the office of Nigeria's coordinating minister of the economy said last month they will start on 1 October.

The Nigerian government vaguely outlined a plan for NNPC to swap crude with Dangote for gasoline on 29 July, presaging today's agreement. Crude and product sales would be denominated in dollars, reflecting international market prices, but settled in the equivalent local currency amounts, the government suggested at the time. It later said that a fully fledged programme starting in September had been worked out with the Dangote refinery.

At full capacity, Dangote's gasoline production will more than cover Nigerian demand. Dangote's latest estimate for Nigeria's gasoline demand is 33mn l/d, down from a previous projection in October last year of 45mn l/d. Dangote's latest forecast is to produce 57mn l/d of gasoline at full capacity, up from a 53mn l/d target it gave last year.

The company is still some way off reaching capacity though. Argus tracking shows the refinery received a little under 185,000 b/d of crude in August, down from 280,000 b/d in July and 350,000 b/d in June.

Up until now, NNPC has been Nigeria's sole supplier of gasoline almost without a break since 2017, relying on imports to meet all of the country's demand. But with today's agreement, the company appears set to substitute imports with supply from Dangote. Replacing imports will cut national demand for foreign exchange, helping to stabilise the naira and bring down inflation, according to Dangote.

NNPC supplied about 44mn l/d of imported gasoline to the domestic market in the final quarter of last year but cut supply to 35mn l/d in January-July this year and to just 30mn l/d in August, a source said. The decline has led to long queues at service stations in Nigerian cities for the past month. NNPC admitted recently that it owes "significant debt" to gasoline suppliers and that the "financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply".

By Adebiyi Olusolape and George Maher-Bonnett