After waiting in line for more than four hours to buy petrol in Nigeria’s capital, Abuja, taxi driver Adebayo Olawole considered himself fortunate he got a half-filled tank.
The day before, he got to the front of the line and was told there was none left.
“I’ve not made any money in two days,” Olawole said outside a Total Nigeria station in the Garki district.
“Today is my lucky day.”
Petrol shortages are common in Africa’s largest oil producer, which imports the majority of its refined fuel, straining the nation’s finances and currency.
Decades of poor maintenance, corruption and mismanagement have left Nigeria’s four state-owned refineries working at a fraction of their capacity.
While the worst shortage in a decade almost caused the west African nation’s economy to shut down in May, with diesel-fired electricity and phone services on the verge of collapse, the situation has created investment opportunities for people including Africa’s richest man, Aliko Dangote, with a wealth of $14 billion (R233.5bn), according to the Bloomberg Billionaires Index.
Dangote, who has made most of his money from his African cement business, is building an oil refinery and petrochemical plant with capacity of 650 000 barrels a day in the commercial capital, Lagos, scheduled for completion by early 2018.
The facility, with capacity to produce 55.2 million litres of petrol daily, will produce other fuels as well as fertiliser and polymers, according to Devakumar Edwin, the chief executive of the Dangote Group.
“It’s a very large refinery. We can produce the entire gasoline requirements of the country,” he said.
On completion the refinery would be the fifth-biggest in the world after plants in Venezuela, South Korea and India.
It would also be the world’s largest single-train refinery, Dangote told reporters at the construction site last week.
“From Nigeria all the way down the coast to Senegal and all the countries in between, there’s almost no functional refinery except the one in Ivory Coast,” said Dolapo Oni, the head of energy research at Ecobank Transnational.
“Dangote is going to be able to plug that market.”
The refinery in Ivory Coast has the capacity to process 65 000 barrels of crude daily, according to the website of the company, Société Ivoirienne de Raffinage.
Nigeria’s refineries have the installed equipment to process 445 000 barrels of crude a day, yet they operated at an average of 5 percent of that capacity last year, according to the state-owned Nigerian National Petroleum Corporation (NNPC).
President Muhammadu Buhari’s administration has ruled out selling the assets, aiming to finance their revamp, even as government revenue has been cut by a more than 72 percent drop in oil prices since the 2014 peak, to an 11-year low.
Oil accounts for two-thirds of Nigeria’s revenue and about 90 percent of its foreign-currency earnings.
Brent crude, which compares with Nigerian oil grades, rose 1.4 percent to $30.73 a barrel as of 11.02am in London on Friday.
Price controls had cost Africa’s largest economy $35bn from 2010 to 2014 and mainly benefited Nigeria’s elite, who consumed more fuel than the poor, according to a World Bank report.
The cost of petrol per litre in Nigeria currently stands at $0.43, compared with $0.74 in South Africa, $1 in Ivory Coast, $1.16 in Angola and $1.04 in neighbouring Cameroon, according to the website globalpetrolprices.com.
“If the government operates the subsidy regime, we can sell it to the government at the subsidised price,” Edwin said.
“If there is no subsidy regime, we’ll sell it directly to the distributors. So practically it is not going to affect our operations.”
Central Bank of Nigeria governor Godwin Emefiele, who was visiting the site, said the refinery could earn foreign income of $6bn a year, helping ease exchange-rate pressures.
He pledged to give the Dangote Group the assistance it needed to secure foreign exchange to complete the plant, estimated to cost about $14bn.
The Abuja-based central bank has resorted to holding the naira at 197 to 199 per dollar since March by introducing trading curbs to conserve reserves and stem a rout after it fell to a record 206.32 in February.
While Nigeria has more than 30 licences issued for the building of privately owned refineries, Dangote is the first to start construction.
If Dangote succeeded, “it means that Nigeria can process more than its local fuel needs and also process on behalf of others so that we may start exporting refined products rather than exporting crude”, said Bismarck Rewane, the chief executive of Lagos-based business advisory Financial Derivatives.
Nigeria uses about 35 million litres of petrol a day, according to the NNPC.
Buhari’s government insists there will be room for the state-owned refineries to operate alongside the private ones.
Yet with the NNPC burdened by debt of about $5bn owed to its joint-venture partners, it is unlikely to compete efficiently with private refineries, according to Ecobank’s Oni.
The target was to “keep them consistently producing at above 90 percent of their capacity”, Petroleum Resources Minister of State Emmanuel Kachikwu said in an interview on Tuesday in Abu Dhabi, adding that he hoped to announce a programme before the end of this month for others to come in and build new refineries.