Now more than ever, Africa needs to examine its options for reducing its energy expenses, as energy cost heavily influences the growth or decline of any given economy.
Energy cost is a key determinant of inflation, alongside
basic amenities like food, water and other commodities distinct and essential
to different regions.
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For an economy to thrive, energy must be as cheap as
possible. Unfortunately, this has hardly been the case in Africa for the past
year.
The ensuing conflict between Russia and Ukraine has brought
about a substantial spike in the cost of energy, globally.
Needless to say, for a developing continent like Africa, the
brunt of this crisis is being felt to extensive degrees, as numerous countries
on the continent for the past year have been dealing with some level of
inflation.
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The inflation, while spurred in parts by food hikes, and
other nuanced factors, is still majorly a result of the rising cost of energy
that has plagued the entire planet.
Africa hardly refines its own oil despite its tremendous oil
reserves, which in hindsight has caused a gargantuan deficit in its oil
bottomline.
Simply put, most oil-producing African countries,
particularly Sub-Saharan African countries, sell their crude to countries outside
the continent for a specific amount, and then buy back said oil in a refined
state for a similar amount.
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This in itself is as financially counter-productive as it
gets, however, what makes things significantly worse is when external factors
like war make the oil importation costs much more expensive. A plight which
almost every African state suffered in the previous year.
It is also disturbing that this problem would persist for
the next two years, as numerous global economists have hinted at the possibility
of a recession this year.
With this in mind, the glaring solution to remedy this
problem is to simply build refineries in Africa. Fortunately, this idea has
been floating all across Africa for some time now.
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As recently as this week, Angola and Zambia established a
trade relationship, where Zambia would import oil from Angola, once Angola is
done with the construction of its refinery. Read the story here.
In Nigeria, this conversation bears a striking resemblance
as Africa’s richest person Dangote has expressed interest in building a
refinery in the country.
He has touted this idea for a while, but committed to
initiating the project before the end of 2023.
Below are 5 things you need to know about Dangote’s new
oil refinery:
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Timeline: Commencement for the refinery’s
construction was meant to begin in 2022, but a few glitches placed the plans on
hold. However, the project is set to begin this year, as the President of
Nigeria, Muhammadu Buhari has committed to commissioning the Dangote Oil
Refinery on the 24th of January. The project is set to be completed by 2026.
Location: The architected project has already been touted as an African milestone should it be realized. It is projected to be the largest vertically integrated petrochemical complex in the world. The refinery is going to be situated in Lagos Nigeria, specifically the Lekki Free zone, covering a land area of approximately 2,635 hectares, which according to the site is about six times the size of Victoria Island.
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Capacity: The refinery would be able to produce
650,000 oil barrels per day, subsequently, with an initial rollout of 540,000
barrels per day. Also, the facility will produce 3 billion standard cubic feet
of gas, 65 million liters of premium motor spirits (petrol), 15 million liters
of diesel, and 4 million metric tones of jet fuel each day, approximately, 8
million tons of petroleum products annually
Objective: With the refinery’s projected
capacity, Dangote has noted that it would be in charge of Nigeria’s entire oil
supply, effectively eliminating the need for oil importation. However, the
company also disclosed plans to produce a petroleum surplus intended for sale
across fellow African countries and perhaps other regions outside the
continent, which would bring about an estimated $11 billion in petroleum
products from Nigeria per year.
Cost: For an ambitious project like this, the cost is expected to be hefty, and said expectation is not far off. The Dangote oil refinery would cost a total of $19 billion to build
SOURCE: PULSE.COM.GH BY CHINEDU OKAFOR
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