Dangote Refinery Africa's biggest refinery: Dinosaur's last stand?

“[T]he Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”

Sheikh Zaki Yamani (Formerly Saudi Arabian Oil Minister)

The news making the rounds in Africa in the past week is the launch of Africa’s largest refinery. The much-acclaimed refinery is the world's largest single-train refinery built by Dangote who is also Africa’s richest man. Loud drums of celebration are being rolled out across Nigeria of the potential end to the mirage of challenges linked with production and consumption of oil. As the dust settles, muted voices are asking questions on perplexing issues pertaining to the refinery. It is asked whether the optimization of petroleum would deliver Nigerian to the promised land of becoming an industrial economy. Whether Dangote Refinery would reduce the public debt crisis and oil subsidy scams? Can Dangote increase or reduce the carbon budget of the country? ?These perplexing questions are now a source of concern to many.

For starters, we note that moribund refineries in Nigeria are a drain on the country's national finances. The energy industry is being crippled by the large bills for turnaround maintenance of dead refineries, This places the oil-producing nation in a precarious economic, financial, and political position. Amidst this, a new army of rent seekers has grown out of the shadow of the comatose refinery and is now supplying Nigeria with refined crude oil. For instance, in 2021, Nigeria spent?$11.3bn on importing refined petroleum products. Equally significant, Nigeria subsidizes the pump price of petrol which has constituted a bottomless pit for all sorts of scams. Due to the country’s importation of the bulk of its refined petroleum products, sustaining petrol subsidies is seen as an avenue to minimize the impact of rising global oil prices on the people. This is against the backdrop of spending $10bn on fuel subsidies in 2022 and is expected to spend?$7.5bn on fuel subsidies by mid-2023. This is about 24% of Nigeria’s 2022 budget placing an additional burden on public finances.

Dangote Refinery as a Solution to the Looming Crisis?

Depending on the side of the ecological divide one belongs the answer is either Yes or No. For the fossil apostles, it is a big Yes because it would usher in a new dawn of economic emancipation even though within a select few. For the environmentalists, this is tantamount to running with the hares at night and in the daytime hunting with hounds. Nigeria’s duplicity in promoting two inversely related parts to different destinations in the Agenda 2063 and Long-Term Low Emission Strategy is part of the problem. Dangote as a core capitalist is doing what all fossil capitalists are known for: cashing in on the lacuna and existing institutional debilities. ?

As a short-term measure, Dangote Limited will raise the Nigerian economy from the ashes of the looming crisis of economic uncertainties towards a stable terrain where the importation of oil is minimized. But that’s all. I really doubt if the immense benefits will change our status as a debtor nation or improve our ratings or reduce the carbon intensity. What will emerge is that the large sums committed to subsidizing oil will find a new leaking hole to swallow it. ?The sad story is that when one door of corruption closes, a new ditch will open somewhere else to consume the saved amount.

The Crux

The Nigerian economy is prone to cyclical distortions in the international market. Uncertainties of the oil market make the resource considered the “heartbeat of the nation” and also to be the country’s Achilles heel. Nigeria’s response to the perennial volatility in the oil market is largely one of ambivalence and not commensurate with the scale of the problem. In most cases, economic diversification has become a rhetorical statement conjured in moments of crisis to assuage the restive society. But once the crisis is temporally overcome, the planners of national development seem to relapse to the status quo. These recurrent lapses show that the efforts are mainly grandstanding commitment to economic diversification, and hence were never meant to redirect the sinking ship of the Nigerian economy.

Again, there is no tangible clean or green energy strategy and growth plans comparable to those articulated in other oil-producing countries like Saudi Arabia. Saudi Arabia which is the world’s foremost exporter of crude oil in its Vision 2030 plan laid out concrete steps to reduce its dependence on a single commodity. The country’s economic diversification strategy strives to wean her fossil fuel dependence. They correctly assumed that oil faces an uncertain future, hence the need for oil production and renewable energy proliferation to exist side by side. To this end, the development plan laid out concrete steps of gradually phasing out oil from the energy supply mix with this initiative as the main driver of the unbundling of Arabian American Oil Company (ARAMCO).

This is because the oil and gas sector is the main income meant for realizing near-term developmental needs while also strengthening the long-term viability of the economy. It is therefore not surprising that despite her pursuit of short-term goals for economic development other measures in the form of Low Carbon Development (LCD) minimally exist side by side. Such coexistence of diverse goals creates the impression of growing in opposite directions. Better still, it may be a case of paying lip service to one of the goals. One would expect that with the trend towards phasing out fossil fuel gaining momentum the country should robustly pursue only sustainable energy objectives, instead of taking inversely related routes to a decarbonized polity.

How Nigeria rises above the conflictive situation and narrow prism of upholding only a carbon-led outlook is an onerous task. One will expect a new blueprint for addressing the crisis would be formulated by now. But on the contrary, new oil production facilities are being built. ?The basic fact here remains: the Nigerian economy is a satellite economy of international monopoly capital. As a satellite economy, it is an economy characterized by primary production highly import-dependent. ?With the Dangote refinery, the humongous expenses on subsidy are expected to be saved but, I doubt if Dangote will be mindful of his responsibility to the environment.

?Going forward

The refinery is one last major effort of Nigeria's elite championed by Dangote to cash on the oil boom. But it has a date with the hangman. Oil’s looming crisis is not a far-off chance but a political and economic reality, This necessitates proper management of oil resources through eco-efficient utilization of nature. Building new bridges for equitable socialization of nature such that intra and inter-temporal equity dimensions between present and future are resolved will minimize the impact of Dangote depletion. Unfortunately, the decision is not in the hands of the people. The real decision on the allocation of resources rests with the army of rent seekers who sing siren songs of efficiency in the daytime but in the night are avid apostles of fossil capitalism.

Said, Nigeria has limited options in resolving the carbon paradox. The solution for Nigeria is to capture and store carbon emissions from Dangote oil production. this is a big ask. It could be through carbon sequestration programmes facilitating large-scale capture and storage at an industrial scale. The second and most popular option is to reduce the uptake of greenhouse gases with the implication of drastically reducing the production and consumption of fossil fuels. While the third option is the Reducing Emission from Deforestation and Forest Degradation (REDD+) mechanism aimed at earning carbon credits for maintaining forest resources in their pristine state. Whatever solution Nigeria proffers something must give. And that is the price for our carbon profligacy. This requires viable institutions that will incentivize processes to overcome societal pressures, recognizing the role traditional knowledge plays in moderating uncertainties and operationalizing the biomass economy to create inclusive green growth. The country should develop institutional structures effective in resolving the low carbon growth and economic growth dilemma. Such institutional structures should be reinforced with a clearly articulated Low Carbon Growth Plan (LCGP) which lays out the direction and vision of development whereby contradictions of growing the economy while also ensuring decarbonization is resolved.