T&Cs Found Here: Confidential C
T&Cs Found Here: Confidential C
Copying articles
to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy
additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article
service. More information can be found here.
https://www.ft.com/content/1631cd52-c89f-11e8-86e6-19f5b7134d1c
Confidential C
650,000b/d capacity outstrips the country’s current total of 455,000b/d from four state-run
refineries that often run at less than 10 per cent utilisation. The decrepit state-run refineries
“haven’t been able to justify all the investment in them for years”, says Jubril Kareem, energy analyst
for Ecobank. After Mr Dangote’s refinery begins production, he says, “they could easily die a natural
death because there won’t be any need for them any more — which actually a lot of people have
been pushing for in recent years. Those refineries are not operating at any level that [justifies the
view that] government should still fund them”. But even when Mr Dangote produces more fuel than
Nigeria needs, he may not be able to sell it at home. The country’s subsidy regime involves the state-
run National Nigerian Petroleum Company importing more than $7bn of fuel each year and selling it
to retailers, who must sell it to the public at the subsidised rate of N145 (40 cents) a litre. Selling
refined products at that price would be untenable for Mr Dangote, says Temilade Aduroja, energy
analyst at Renaissance Capital in Lagos. “Our assumption is that the subsidy will have to go because,
obviously, at N145 Dangote won’t make a profit,” she says. “The cost to produce at the refinery is
more expensive than N145 — however, it’s cheaper than importing.” Ms Aduroja says she expects
the government to scrap or change the politically sensitive subsidy after February’s presidential
elections. “People will adjust — a couple of years ago it was N87 and they increased it to N145,” she
says. Or the government and the company could decide on a flat rate at which the state will sell
crude. The project will have fiscal implications, too. By turning Nigeria into a net exporter of refined
oil it should reduce demand for foreign exchange, which is 40 per cent driven by fuel imports. And
then there are taxes. “When it comes to government revenue, just imagine the amount of tax that
refinery is going to be paying,” says Ms Aduroja. Get alerts on Nigeria when a new story is published
Get alerts Copyright The Financial Times Limited 2021. All rights reserved. Reuse this content(opens
in new window) Follow the topics in this article Oil Add to myFT Oil & Gas industry Add to myFT
African companies Add to myFT Nigeria Add to myFT Aliko Dangote Add to myFT Feedback Useful
links Support View Site Tips Help Centre Contact Us About Us Accessibility myFT Tour Careers Legal
& Privacy Terms & Conditions Privacy Policy Cookies Copyright Slavery Statement & Policies Services
FT Live Share News Tips Securely Individual Subscriptions Group Subscriptions Republishing
Contracts & Tenders Executive Job Search Advertise with the FT Follow the FT on Twitter FT Transact
Secondary Schools Tools Portfolio Today's Newspaper (ePaper) Alerts Hub Business School Rankings
Enterprise Tools News feed Newsletters Currency Converter More from the FT Group Markets data
delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2021. FT and ‘Financial Times’ are
trademarks of The Financial Times Ltd. The Financial Times and its journalism are subject to a self-
regulation regime under the FT Editorial Code of Practice. Close drawer menuFinancial Times
International Edition Switch to UK Edition Top sections Home World Show more World US Show
more US Companies Show more Companies Tech Markets Show more Markets Climate Opinion
Show more Opinion Work & Careers Show more Work & Careers Life & Arts Show more Life & Arts
Personal Finance Show more Personal Finance How to Spend It Special Reports FT recommends
Graphics Lex Alphaville Lunch with the FT FT Globetrotter #techAsia Moral Money FTfm Newsletters
Video Podcasts News feed myFT Portfolio Today's Newspaper (ePaper) Crossword Our Apps Help
Centre Subscribe Sign In
Confidential C