The Dangote Refinery in Nigeria, one of the largest crude oil processing facilities in Africa, recently announced plans to export part of its gasoline production. This decision marks a turning point in the refinery's strategy, initially designed to meet the needs of the domestic market. Due to rising fuel prices and falling local demand, the refinery is forced to look for buyers internationally.
The Dangote refinery, with a capacity of 650,000 barrels per day, was intended to reduce Nigeria's dependence on fuel imports. However, since gasoline production began in September, rising retail prices have made it difficult for local consumers to purchase fuel, leading to a decline in demand. In October, the price at the pump increased almost five times compared to the previous year, intensifying concerns about the ability of Nigerians to bear such a cost.
First export attempt canceled
In early November, the refinery attempted to launch its first export offer by issuing a tender for 40,000 tonnes of gasoline. However, this offer was quickly rescinded due to local pressure. According to sources close to the industry, the decision to retract the offer was motivated by mixed reactions from the public and the authorities, with the Dangote project seen as a means of ensuring Nigeria's energy security above all.
Despite this cancellation, the refinery confirms that it has the necessary stocks to begin exporting more than 200,000 tonnes of gasoline, with potential destinations in West Africa and the Caribbean, where trading partners have expressed their interest.
Fuel quality and competitiveness
The refinery now produces fuel with a sulfur content of less than 50 parts per million (ppm), a significant improvement from the previous standards of 500 ppm still common in Nigeria in 2023. This qualitative improvement should theoretically allow the refinery to compete European imports and attract regional customers, particularly in Ghana, where standards are similar.
The West African market, as well as certain destinations in the Caribbean, have been identified as potential outlets for this higher quality species. During the Africa Energy Week, the CEO of the Ghana National Petroleum Authority, Mustapha Abdul-Hamid, raised the possibility of importing fuel from the Dangote refinery, highlighting the potential for cost reduction compared to to European supplies.
An uncertain future for the domestic market
With local gasoline production still far from meeting national demand, the Dangote refinery's decision to turn to exports raises questions. The Nigerian state, through the state-owned NNPC, continues to import cheaper fuel, affecting Dangote's competitiveness in its own market. The refinery has also denounced these imports, asserting that the inferior quality of certain imported products harms its local sales.
Discussions are underway to establish long-term partnerships with Caribbean stakeholders, as shown by recent meetings between the Dangote group and representatives of the Caribbean Community (CARICOM). These negotiations should allow Dangote to expand its commercial activities to regions where access to quality petroleum products is limited.
In short, the Dangote refinery's export strategy reflects a repositioning in the face of the difficult situation in the Nigerian market, marked by rising prices and heightened competition. It remains to be seen whether this strategy will succeed in guaranteeing economic stability for the company and satisfying the expectations of its investors.
