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Dangote Refinery won’t hit capacity till 2024

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By Abiodun Okunloye

Nigeria may not be capable of satisfying its diesel demands due to low capacity.

According to a report titled “Africa review and outlook (2022 – 2023) Turbulence on the road to recovery” by S&P Global Commodity Insights, it has been revealed that the Dangote Refinery will not operate at full capacity until the year 2024. Because of this, it won’t have enough diesel to provide the local demands in significant quantities. Despite the fact that the refinery will open in Q4 2023, the report cautions that Nigeria may not be capable of satisfying its diesel supply demands in the near term. The report indicates that Sub-Saharan Africa (SSA) relies heavily on imports because of its inadequate refining capabilities.

Nearly 80% of the diesel used in Sub-Saharan Africa is imported, and this amounts to nearly 700,000 barrels per day. When fully operational, the Dangote refinery in Nigeria is anticipated to generate large additional volumes, which, in turn, will reduce the amount of pressure created by supply restrictions throughout the area. Yet, the vast greenfield refinery has a long way to go before it is completed. By the fourth quarter of 2023, it will begin operating, although it won’t be at full capacity until the end of 2024.

Diesel cost per litre surged in January 2023 due to scarcity.

In recent years, there has been a dramatic increase in the cost of diesel in Nigeria. This can be attributed to the nation’s inability to maintain its own refining capacity, which has forced the nation to rely on constant imports of the product. The average price of diesel per litre in Bauchi state, Nigeria, increased to N900 in January 2023, per figures released by the National Bureau of Statistics (NBS). Meanwhile, diesel prices across the country increased by 187.69% in just a year. In January 2022, a litre of diesel cost N288.09, while in January 2023, the average price was N828.82.

Based on the report’s expectation of a disruption in supply caused by Russia, S&P Global is concerned that diesel prices may rise even further if Nigeria cannot restart its domestic refining capacity. Diesel-powered generators have become widespread in Nigeria due to the country’s poor electricity infrastructure. Yet, as prices continue to rise due to the lack of any refining capacity in the country, companies have begun making the switch to solar power. An alternative clean power supply that protects the environment is made available to commercial and industrial (C&I) firms by switching to solar, says the experts in the country.

There is a significant shift to solar power by companies.

Furthermore, Evtec Energy and the financial technology firm MICT entered into a partnership agreement in February 2022 to construct a solar photovoltaic (PV) facility with a capacity of 110 MW for Tingo Foods in Delta state, Nigeria. Tingo Foods’ food processing factory will be powered by the project, which is anticipated to cost $150 million. Financial institutions Credit Suisse, JPMorgan, and Roth will join Evtec Energy in funding the project. This is only one instance of a commercial and industrial establishment that has replaced diesel generators with solar photovoltaic panels.

A 2023 report by the Energy Commission of Nigeria and the International Renewable Energy Agency (IRENA) titled “Renewable Energy Roadmap for Nigeria” developed solar photovoltaics (PV) would then have a major impact in Nigeria as power demand keeps rising across all sectors of the economy and solar PV capacity is anticipated to surpass 5 gigawatts (GW) by 2030, and the off-grid solar systems would provide 13 GW by the decade’s end. According to IRENA, Nigeria’s average yearly global horizontal irradiation ranges between 1,600 and 2,200 kWh/m2. This contributes to the country’s strong solar resource potential. In contrast, the greatest values are found in the northern region of the nation.

Sub-Saharan Africa’s overall product demand is diesel.

Moreover, the worldwide market is predicted to be tight in 2023, with interruptions anticipated because of the predicted embargo on Russian shipments. According to the findings of the report, the shortfall in diesel supply had significantly widened since 2020, when a trend of refinery shutdowns surged over the SSA region and drastically reduced domestic supply. Nonetheless, diesel will continue to dominate Sub-Saharan Africa’s overall product demand in 2023, with consumption predicted to increase by 45,000 barrels per day, or 4.5%, over 2022 levels.

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S&P Global: Website

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