NIGERIA'S oil business is chaotic, primitive and sunken. Proof is discovered within the Dangote Petroleum Refinery's current choice to import crude oil from the USA within the coming months, because the $20 billion facility intensifies steps to pump refined merchandise from the USA. With Nigeria now the highest producer of crude oil in Africa, President Bola Tinubu, who can also be Minister of Petroleum Sources, ought to rapidly implement options that can preserve provides to home refineries.
though Bloomberg Whereas this choice reveals how aggressive US barrels have grow to be within the world market, the priority stays that crude oil imports will dampen Nigeria's comparative benefit.
The Dangote Petroleum Refinery and Petrochemical is a 650,000 barrel per day refinery in Lagos State. The power has thus far acquired six million barrels of crude oil equipped by the NNPC and different worldwide oil firms working in Nigeria.
However that appears to be the top of the excellent news. For many years, Nigerians haven’t benefited from this pure useful resource. For years the nation couldn’t meet its OPEC quota of 1.78 million barrels per day; it imports petroleum merchandise at nice price to the financial system as its 4 government-owned refineries, with a nominal capability of 445,000 barrels per day, are in a coma. State Governors declare that the NNPC has not transferred kobo to the Federation Account in 2022.
The result’s that Nigeria can not meet its home crude oil wants. The identical goes for fuel, the place Nigeria is among the many high 10 on the planet with 206.5 trillion cubic toes.
At an period when oil firms around the globe are declaring mega earnings, costs of petroleum merchandise in Nigeria have grow to be unaffordable to residents after Tinubu unilaterally abolished petrol subsidies and launched the naira in 2023.
As well as, the theft of commercial oil, estimated at 400,000 barrels per day, limits manufacturing. Mele Kyari, CEO of NNPC Group, stated the price of producing a barrel of crude oil in Nigeria is the best on the planet as a result of insecurity, a number of taxes and varied issues. This prompted some IOCs to divest their pursuits in Nigeria.
The continued theft of crude oil in Nigeria is damaging the nation's repute as a dependable provider of crude oil and undermining investor confidence within the oil and fuel sector. The NNPC's lack of ability to successfully curb oil theft and make sure the safety of oil infrastructure displays poorly on the federal government's capability to manipulate and defend very important nationwide belongings. Such reputational dangers could deter potential traders, together with strategic companions, from pursuing long-term partnerships and investments within the Nigerian oil business.
The Dangote refinery importing crude oil from the US has a number of implications for the Nigerian oil market. It may cut back the demand for domestically produced crude oil in Nigeria. This might result in decrease gross sales and revenues for Nigerian oil producers, probably impacting authorities revenues from oil exports.
The introduction of imported crude oil by Dangote Refinery into the Nigerian market may influence value dynamics.
Importing crude oil from the US may elevate questions on Nigeria's power safety and dependence on overseas sources of provide. Whereas diversification of provide sources can mitigate dangers related to disruptions to home manufacturing, it additionally exposes the nation to world market dynamics and geopolitical elements that would influence oil costs and availability.
With Dangote importing crude oil, the destiny of the modular refineries arising throughout the nation has been sealed. This discourages home refining as a result of the modular refineries could not have the monetary energy of Dangote to import crude oil from the US.
Due to this fact, the NNPC and the Federal Authorities should launch a brand new chapter on methods to provide crude oil to all home refineries.
