A lot of media people have been talking to Alhaji Aliko Dangote lately; more would give an arm to be able to reach him – all because of the refinery which was advertised as the answer to our perpetual fuel problems. Laymen and women have developed the notion that, when it starts supplying fuel, prices would crash to pre-subsidy removal levels – among other expectations. More unsolicited write-ups have been sent to me by strangers and friends, alike, about Dangote himself and his refinery than I have ever received in a long time.
Suddenly, the Dangote Refinery, apart from pervasive hunger, appears to be the only subject worthy of attention. The opinion leaders are almost evenly divided – those sympathetic to Dangote and those totally against – even though the latter are often afraid to be identified. That is power – the ability to make people fear you even when you don’t know them.
However, of all those who published articles on the subject, Segun Adeniyi of THISDAY made revelations that are pertinent to my article today – which does not seek to advise the man or even request for an appointment. According to Segun, Dangote was invited to Saudi Arabia by a top official of the Ministry of Petroleum of that country.
The Arab leader pointed out to the Nigerian businessman that only global oil companies or nations build petroleum refineries – not individuals – in a bid to persuade Dangote to stop. He was told point blank that his advice was not needed. A more expensive waste of lunch would be hard to imagine. To some extent, Dangote was right to reject the counsel. By then, he had invested too much to turn back. Moving forward was the only option left.
He moved forward; and in May 2023 the refinery was commissioned by President Buhari who played a major role in bringing about the problems now associated with the Dangote Refinery. On that day, the Nigerian Factor, symbolised by Buhari was on full display. The refinery which was not close to processing crude was presented as if tankers could line up the next day to collect fuel for our use. Deliberate, but subtle, falsehood is at the heart of the Nigerian Factor. It leads people to believe that they have been promised something; when indeed nothing definite was offered. Americans call it a swindle.
Who promised Dangote 650,000bpd of crude?
“The combination of these two has now seen us restoring production in our country, and we believe that, as the Honourable Minister has said, we will soon hit the target of 2 million barrels of oil production per day.
“Yes, this country, as we have said, will be a net exporter of petroleum products by the end of this year.”
Mr. Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, NNPCL, Abuja, July 16, 2024.
If you believe that, then you will believe anything from Kyari and the FG. Nigerians remember the promises made last year when fuel subsidy was hastily removed and the economy was thrown into a tail-spin from which it has not recovered. NNPCL promised to get the refineries pumping fuel by December 2023 and Dangote Refinery would start by March 2024. None of those promises has been redeemed till today. As late as last month, Dangote fuel was again supposed to start flowing by this month. Nigeria’s obsolete museum pieces, misnamed refineries, are now expected to be fully operational by December this year. The goal posts keep receding each time the GMD-NNPCL opens his mouth without the decency of any apologies to the stakeholders he had misled each and every time. This is not the time to explain why Nigeria cannot be a net exporter of petroleum products. We wait until December to address that.
“Impress it on the mind of any man [or woman] that he [she] can do no wrong; and he [she] will soon convince you of your mistake.” Joel Barlow, 1754-1812.
However, one promise made by Kyari is emblematic of the way every government, since Jonathan’s has misled investors in the petroleum sector. In the 2014 presentation of the Medium Term Expenditure Framework, MTEF, Dr Ngozi Okonjo-Iweala, had projected 2.3 million barrels per day of crude oil for 2015-2017, at a time Nigeria was struggling to produce 1.7mbpd. In my response, several reasons were given why FG’s projections were off the mark and would result in larger deficits and negative economic variances every year. The National Assembly, NASS, accepted it without a single dissenting vote; perhaps out of fear of questioning a world class economist. Since then, 2 mpd has become almost sacrosanct. Every year FG’s budgets have been based on 2mpd; yet in no single day since Okonjo-Iweala made that error, had Nigeria been able to produce and export up to that level. In fact, the average daily production has averaged less than 1.5mbpd since 2014. For January to June this year, the average has been less than 1.4mbpd.
That is fact; unlike the wishful thinking which is the basis of Kyari’s promise. To begin with, no oil-producing nation can unilaterally increase its production by 50 per cent without triggering a major disturbance in the global market. Furthermore, Nigeria remains a member of the Organisation of Petroleum Exporting Countries, OPEC; and its weakest member. Nigeria needs OPEC more than the organisation needs its poorest member. Nigeria’s interests are served by operating within OPEC’s quota system than by violating it. Kyari knows that 1.7mbpd is Nigeria’s quota for this year. Why then is he promising 2mbpd to the NASS?
Possible crude oil production is a function of the number of rigs in operation and their capacities to deliver. Under Buhari, there has been a steady decline in the number of oil rigs in operation from over 30 in 2014 to less than 15 last year. Rigs, meanwhile, are not things you start and stop like your private car. To be able to deliver 2mbpd of crude from our present low levels regularly must mean that more rigs will return to operations and remain in business henceforth. Kyari has not told Nigerians how many more rigs are re-starting this year. And, invariably, producers are tied to binding long term agreements. Thus, even if Nigeria can ramp up production, not all of it will be made available to Dangote.
Obviously, Dangote, while embarking on his 650,000bpd refinery, had been given assurances by top FG officials – President, Ministers and GMD-NNPCL – which they knew were dubious. They knew, ab initio, that there was no way Dangote could receive that amount of crude oil from Nigeria. Yet, they encouraged the man to develop a sense of “entitlement” – the feeling that the nation owes him a duty to deliver the crude oil and, perhaps at a discount. It is certain that he will not receive 650,000 bpd of crude from Nigeria. But, I strongly believe should be entitled to quantity discount; which is standard practice in commercial transactions. People might raise the question of fairness with regard to smaller private refineries. That is always a difficult issue for marketers of commodities. I know how the matter is handled by brand owners. That should not delay us here. There is an important question needing answers which only Dangote can provide – if he wants.
Why did Dangote embark on a 650,000bpd refinery without settling the issue of steady supply of crude? Surely, supplying Nigeria’s needs cannot be a good reason for such a large country.
