The President of Dangote Group, Aliko Dangote, has stated that the presence of a floating offshore oil market in Lome, Togo, will stifle plans for investors to construct refineries in Africa.
Dangote said the market which was selling refined product at inflated prices before due to lack of refineries in Africa, decided to crash their price after his refinery came on board.
He made the disclosure at Global commodity insights conference on West Africa organised by the Nigerian Midstream and Downstream Petroleum Regulatory Authority and S&P, on Tuesday, in Abuja.
“The market a uniquely African phenomenon. International traders maintain floating storage of about two million tonnes of petroleum products just offshore. These were being sold at inflated prices, given the lack of local refining capacity. Immediately, the Dangote Refinery became operational, they decided to crash the prices.”
“But make no mistake–those who profit from this system will do everything they can to prevent other refineries from emerging. The whole essence of Lome is to ensure that no refinery operates in Sub Saharan Africa. In fact, I don’t see any new major refining project succeeding with the offshore Lome market in existence.
He, however, said these obstacles must be dismantled through policy alignment, regional cooperation, and strong political will.
“Without political support, there is no way for any new large refinery to be built in our lifetime.
He added that across many African countries, this sector has historically been a major avenue for corruption and rent extraction.
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“When you build a refinery and disrupt that system, you are not just innovating, you are threatening powerful interests that will seriously fight back.”
He went on to state that another challenge hindering inter-African trade is lack of unified standard for petroleum products.
“Unlike Europe, which has adopted harmonised fuel specifications, Africa remains fragmented. Every country has its own fuel specification standard. The fuel we produce for Nigeria cannot be sold in Cameroon or Ghana or Togo, even though we all drive the same vehicles. This lack of harmonisation benefits no one–except, of course, international traders, who thrive on arbitrage.
“For local refiners like us, it fragments the market and imposes unnecessary inefficiencies. To give one example, the diesel cloud point for Nigeria is 4 degrees. Without going into the technical details, this means that the diesel should work at a temperature of 4 degrees centigrade. Achieving this comes at a cost to us and limits the types of crude we could process. But how many places in Nigeria experience temperatures of 4 degrees? Other African countries have a more reasonable range of 7 to 12 degrees. This is a low hanging fruit which could be addressed by the regulators.”
