Dangote Refinery begins gasoline production, NNPC to be sole buyer

Nigeria's $20 billion Dangote Oil Refinery, built by billionaire Aliko Dangote, has begun processing gasoline after overcoming delays caused by crude oil shortages. 

The refinery, located on the outskirts of Lagos, started operations in January, initially producing naphtha and jet fuel. 

Now, as it begins gasoline processing, the refinery's 650,000 barrels-per-day capacity could significantly reduce Nigeria's dependence on imported fuel, a costly burden for the country despite being Africa's largest oil producer.

According to Devakumar Edwin, vice president at Dangote Industries Limited, gasoline production is still in the testing phase but will soon be stored in product tanks. 

Although no specific date has been provided for when gasoline will reach the local market, Edwin confirmed that Nigeria’s state oil company, NNPC Ltd, will be the sole buyer of the refinery's gasoline.

"If no one is buying it, we will export it as we have been exporting our aviation jet fuel and diesel," Edwin said, signaling that international markets could be an option if local demand lags.

The start of gasoline production comes at a critical time for Nigeria, where fuel shortages and long queues have plagued the nation since July. NNPC, the country's sole importer of gasoline, has been struggling to meet domestic demand due to $6 billion in debt to oil traders for fuel supplies since January. 

The company’s financial difficulties have exacerbated fuel shortages, leading to a 45% price increase from the official price of 617 naira ($0.39) after fuel subsidies were lifted last year.

Clementine Wallop, director of sub-Saharan Africa at political risk consultancy Horizon Engage, emphasized the importance of Dangote’s gasoline production. 

“The news that Dangote is processing gasoline couldn’t come at a more crucial time given NNPC’s statement about its difficulties securing imported supply due to financial strain," she said. Wallop also raised questions about how NNPC will manage purchasing from Dangote and stressed the need for greater transparency in NNPC's finances.

Nigeria, despite being Africa's top oil producer, imports nearly all of its fuel due to the chronic underperformance of its national refineries. 

The Dangote Oil Refinery’s move into gasoline production is expected to ease some of the pressure on NNPC and improve fuel supply in the domestic market. However, challenges remain as Nigeria grapples with financial transparency and debt issues within its state-run oil sector.