LAGOS: When will gasoline from Nigerian tycoon Aliko Dangote’s mega-refinery finally flood the home market? That’s the question Nigerians are asking as Africa’s most populous country battles chronic petrol shortages. Dangote — again ranked Africa’s richest man by Forbes this year — says he is awaiting the green light from the state-run Nigerian National Petroleum Company (NNPC), the only entity that buys gasoline for the domestic market.

The national oil company has talked about a date of Sept 15. The mammoth plant, the continent’s largest refinery, with a full capacity of 650,000 barrels per day, is supposed to be an economic gamechanger by covering all domestic fuel needs.

The refinery in Lekki on the outskirts of the economic capital, Lagos, faced multiple start-up delays but was inaugurated in May last year. It has promised to resolve the Nigerian contradiction that sees Africa’s largest oil producer and an OPEC member having to rely on costly gasoline imports to keep cars running because of a lack of refineries. Yet, as the deadline for Dangote fuel to reach market approaches, optimism appears to be fading. Just as Nigerians were already struggling with high living costs, they were hit with a surprise 45-percent increase in petrol prices by the state-run company.

NNPC did not respond to an AFP request for comment. “These are policy issues that have to be jointly agreed between us and NNPC,” a Dangote spokesman said, about talks on getting the fuel to market. “For now, let’s keep our fingers crossed.” The other big question is how much Dangote’s petrol will cost Nigerians. “The issue of pricing is the biggest elephant in the room,” analyst Ayotunde Abiodun of Nigerian firm SBM Intelligence said. “Many Nigerians reasonably expect that the Dangote refinery’s supply of refined products should come at a cheaper price,” he added, pointing to the refinery theoretically cutting out import costs.

But “market realities” such as “global oil prices, the cost of oil supply and refining margins” make that unlikely, at least in the short term, he said. Dangote must also cover production costs and repay the debt used to build the giant refinery. It “will most likely prioritize markets where it can make higher profit margins” and sell some gasoline outside the country, Abiodun said.

When he came to power in May 2023, President Bola Ahmed Tinubu officially ended the costly fuel subsidy that had kept petrol prices low for decades. Investors welcomed the reform but the price of petrol for Nigerians then tripled. — AFP

The NNPC has admitted continuing to subsidize petrol, an untenable situation for a company with debt of $6 billion. To cover its costs, Dangote would have to sell its petrol to the NNPC at the international market price, “around 1,100 naira”, according to Ademola Henry Adigun, of AHA Consultancies.

“The government will have to pay the difference between this price and the price at the pump” unless it increases the fuel price again, Adigun said. But that would be very difficult for the population and could cause “riots”, he added. — AFP