S&P Global Commodity Insights has recently released a report predicting a significant shift in West Africa’s fuel market with the upcoming completion of the Dangote refinery. The massive refinery, which is set to be located in Lagos, is designed to have a capacity of 650,000 barrels per day and is expected to play a vital role in reducing West Africa’s dependence on European petrol imports.
According to the report, the Dangote refinery could potentially reduce the region’s reliance on imported petrol by up to 290,000 barrels per day by 2026, leading to greater energy security and potentially lower fuel prices for consumers. However, the impact of the refinery on the domestic market remains uncertain, with the final destination of the refined products (domestic vs export) depending on global fuel prices and profit margins.
While the Nigerian government has expressed hopes of channelling a significant portion of the refinery’s production domestically to address fuel costs, the refinery may prioritize exports if international markets offer higher prices. This could put pressure on the Nigerian government to find alternative solutions for its domestic fuel needs.
The timeline for the refinery’s operations is also subject to debate, with Dangote expecting to produce gasoline by May 2024, while S&P analysts believe a more realistic timeframe is Q4 2024. Any delays in reaching full capacity will postpone the impact of the refinery on West Africa’s fuel market.
The report also highlights that West Africa is currently experiencing a major transformation, with new refineries planned or under construction in Nigeria, Ghana, Angola, and South Africa. This increased refining capacity across the region is expected to reduce reliance on imported fuels and improve fuel security.
Furthermore, the report notes that Russia’s halt on exports has created opportunities for new suppliers, with Spain emerging as a gasoline exporter to Nigeria. This diversification of suppliers could benefit West Africa by increasing competition and potentially lowering fuel prices.
Finally, the report highlights that stricter Nigerian regulations regarding sulfur content in imported gas oil further limit European imports, pushing the region towards cleaner fuels. Additionally, the Dangote refinery’s operation could also reduce the number of fuel tankers waiting off the coast of West Africa, easing congestion, and potentially lowering transportation costs.
