Aliko Dangote, President of Dangote Group, has called on the Nigerian government to stop using crude oil as collateral for loans, emphasizing the need to ensure that local refineries have a steady supply of crude. Speaking at a summit organized by the Crude Oil Refinery Owners Association of Nigeria in Lagos, Dangote criticized the practice, stating it was detrimental to the country’s future oil reserves.
“It is unfortunate that while countries like Norway are putting oil proceeds into a future fund through their national wealth funds, in Africa, we are spending oil proceeds from the future today,” Dangote said.
His remarks were delivered by Mansur Ahmed, Group Executive Director of Dangote Group, who represented him at the event.
Dangote’s comments come in the wake of a recent report by The PUNCH, which revealed that the Nigerian National Petroleum Company Limited (NNPC) has committed 272,500 barrels per day of crude oil under various crude-for-loan deals, amounting to a total of $8.86 billion. This arrangement means that over 8 million barrels of crude oil are used monthly for loan repayments, according to the Nigeria Extractive Industries Transparency Initiative.
Call for Domestic Crude Prioritization
At the summit, Dangote stressed the importance of prioritizing domestic crude supply for Nigerian refineries.
“We will need to prioritize the implementation of the domestic crude supply obligation. We will need to expand crude production capacity to support demand from the refinery,” he urged.
The Dangote Group has already made significant strides in the refining sector, with the construction of its 650,000-barrels-per-day refinery in Lagos. Remarkably, Dangote revealed that this major project was completed without any government incentives.
“We built the Dangote refinery without a single incentive from the government. However, to achieve the vision of turning Nigeria into a refining hub for the region, investors need to be incentivized,” he added.
Global Shifts in Refining Capacity
Dangote also highlighted global trends in the oil refining industry, noting that new refining capacity is being developed in Kuwait, China, and Bahrain, with a total of 1.8 million barrels per day expected to come online in the next three years. In contrast, European countries are tightening environmental standards, leading to the shutdown of several refineries, including Scotland’s only refinery, which is set to close next year.
“Several refineries across Europe and China, with a total capacity of 3.6 million barrels per day, are likely to shut down in the coming years,” Dangote said, referencing a report.
He also mentioned that Shell is converting its refinery in Germany into a lubricating plant due to the changing landscape of the oil industry.
Africa’s Refining Challenge
According to Dangote, Africa faces a critical challenge: despite producing over 3.4 million barrels of crude oil per day, countries along the coast from Senegal to South Africa still import around 3 million barrels of petroleum products daily. These imports primarily come from Europe, Russia, and other regions.
“To grab this opportunity, we will need to build 1.5 million barrels per day of additional refining capacity. This would not be an easy feat, and strong support from the government and cooperation between stakeholders would be essential,” Dangote emphasized.
Also Read:
- Nigerian Government Begins Selling Crude Oil and Petroleum Products in Naira
- FG Moves to Revoke Dormant Oil Well Licenses under PIA Amendment
Dangote Refinery Named Exclusive Jet Fuel Supplier
In a related development, the Federal Government has officially designated the Dangote refinery as the exclusive supplier of jet fuel, or Jet A1, to Nigerian airlines. This was announced by the Minister of Aviation, Festus Keyamo, during an interview with Channels TV.
“The airline operators just met recently. With my blessing, it’s a decision from the airline operators in Nigeria that they should only buy from Dangote refinery Jet A1,” Keyamo stated.
He added that the government had also initiated a naira-for-crude purchase agreement with the Dangote refinery, eliminating the need for a dollar component in transactions.
Keyamo explained that sourcing jet fuel from the Dangote refinery would shield Nigerian airlines from the volatility of international oil prices, reducing their operational costs.
“It’s all naira, no dollar component,” he said.