Explainer: How Dangote’s refinery is delivering giant-sized punch against diesel cartels

THE 650,000-per-day Dangote oil refinery came with huge promise for Nigeria’s economy and now the plant is beginning to deliver a giant-sized punch against entrenched diesel cartels in the country.

Nigerians consume about 14 million litres of diesel daily, according to data from the Nigerian Midstream and Downstream Petroleum Regulatory Agency.

Before diesel deliveries began from the giant Dangote oil refinery, the product retailed for about N1,700 a litre but this is now expected to crash to N1,250 in the Lagos area and slightly higher elsewhere in the country, therefore offering significant relief for businesses and families across Nigeria.

The magnitude of the diesel availability and the price is already unsettling the handful of diesel cartels in Nigeria.

Dangote’s group executive, Devakumar Edwin, confirmed that queues of ships are forming beside the refinery to pick up diesel and jet fuel for supply into the local market.

“We have substantial quantities. Products are being evacuated both by sea and road. Ships are lining up one after another to load diesel and aviation jet fuel,” Edwin told Reuters.

“Ships load a minimum of 26 million litres, though we try to push for 37 million litres vessels, for ease of operations.”

The supplies from the refinery, ranked as the largest single train refinery in the world, is being described as a major step in the country’s quest for energy independence.

The refinery was built on a peninsula on the outskirts of the commercial capital Lagos at a cost of $20 billion by the continent’s richest man Aliko Dangote and was completed after several years of delays and and will be the largest in Africa and Europe when it reaches full capacity this or next year.

Local oil marketers agreed a price of N1,225 per litre of diesel following a bulk purchase agreement, before putting their mark-up, said Abubakar Maigandi, head of the Independent Petroleum Marketers Association of Nigeria.

The association’s members control about 150,000 retail stations across Nigeria, Maigandi said.

Another marketers’ group, the Depots and Petroleum Products Marketers Association of Nigeria, said its members were seeking letters of credit to buy petroleum products from Dangote.

“Our members are discussing with banks and these talks have reached advanced stages, when we have our letters of credit, we will begin lifting products,” Femi Adewole, the association’s executive secretary said.

The Dangote refinery is touted as the turning point to end Nigeria’s reliance on imported petroleum products. Nigeria is Africa’s most populous nation and its top oil producer, yet it imports almost all its fuel due to lack of refining capacity.