Nigeria’s economy has been faltering due to struggles in the oil industry. The country is the largest oil producer in Africa, outputting around two million barrels per day and consuming just 267,000 barrels per day. Interestingly enough, Nigeria has a strong dependence on fuel imports. Their struggles stem from the fact that they simply don’t have enough refineries, and the ones that exist are not maintained well enough to work to their full capabilities. The industry has been slipping into turmoil, as industrial scale theft and inefficient fuel subsidy policies have slowed production significantly.
Aliko Dangote, founder of Dangote Industries, hopes to turn this downward spiral around in the oil industry and in the economy of Nigeria as a whole. He just signed a $3.3 billion loan deal to help build the largest refinery in the southwest area of Nigeria that will cost $9 billion when all is finished. It is planned to open by 2016 and with this it will create thousands of jobs and hopefully double the fuel production of Nigeria. Dangote stated that Africa as a whole “will be less reliant on importing fuel and fertilizer from foreign markets, reducing the negative impact of negotiating terms within increasingly turbulent international markets.”
Dangote’s loan is hopefully what can give this Nigerian economy the boost it needs to remain competitive on the global market and in the oil industry. If it works, many African countries will be positively influenced by the refinery and hopefully help create growth in Nigeria and economies all over AfricaThe industrial-scale theft has become more prevalent in recent years, and it occurs when thieves breach the pipelines and take the fuel for themselves, while damaging the refinery and causing fires and shutdowns in some occasions. This has cut production levels and brought production down from 2.5 million barrels per day to 1.9 million barrels per day, and costs Nigeria over $7 billion dollars a year. Another problem that was bringing the industry down was the subsidy policy. The government proposal to slash the subsidy resulted in protests, and the government has been under fire for failing to utilize the oil revenues in the past. On top of all of that, an investigation found that embezzlement within the subsidy program cost the country over $6 billion in two years. With the second largest economy in Africa and more than half of their population living in poverty, will Dangote’s loan and Nigeria’s new refinery be enough to help boost this economy?