Dangote Refinery to Supply Petrol, Other Products to Ghana

Ghana-Dangote Refinery Fuel Deal Sealed

 “Alliances for Growth...”

Ghana partners with Dangote Refinery to reduce dependence on international markets, ensuring stable fuel prices and energy security.

Ghana is taking a significant step to boost its energy security and regional economic ties by sourcing refined petroleum products from Nigeria's Dangote Refinery. Dr. Mustapha Abdul-Hamid, CEO of the National Petroleum Authority of Ghana (NPAG), made this announcement at the 2024 OTL Africa Downstream Energy Week in Lagos on October 29. This move aims to establish a reliable supply chain for petroleum products in Ghana while fostering collaboration with neighboring countries.

Benefits of the Partnership

Reduced Dependence on International Markets: Ghana will reduce its dependence on international markets, particularly Rotterdam, for petroleum products.

Economic Growth: The partnership is expected to promote economic growth in Ghana and Nigeria through increased trade and cooperation.

Job Creation: The Dangote Refinery has already created over 30,000 direct and indirect jobs during construction and is expected to employ thousands more upon completion.

Regional Cooperation: The partnership will strengthen regional cooperation and economic ties between Ghana and Nigeria.

About Dangote Refinery

Capacity: The Dangote Refinery has a production capacity of 650,000 barrels per day.

Location: The refinery is located in Lekki, Lagos, Nigeria, and is valued at $19 billion.

Objective: The refinery aims to reduce Nigeria's dependence on imported petroleum products and meet the country's fuel demands.

Ghana is taking bold steps to reduce its dependence on costly imports from Rotterdam. At the 18th edition of the OTL event, themed “Alliances for Growth,” Abdul-Hamid outlined Ghana's strategy to achieve this goal. The plan involves entering a supply agreement with Dangote Refinery, a move that promises to breathe new life into Ghana's energy sector.

Ghana is also expanding its fuel export network to cater to neighboring countries, including Burkina Faso, Mali, and Niger, as well as international facilities like U.S. military bases. This development is expected to bolster Ghana's position as a key player in the regional energy market.

As Abdul-Hamid aptly put it, “The Dangote Refinery, with its large-scale output, is expected to meet Nigeria's domestic demand, enabling excess production to be exported to Ghana.” This partnership is poised to yield mutual benefits for both Nigeria and Ghana, fostering economic growth and cooperation in the region.

Abdul-Hamid, CEO of the National Petroleum Authority (NPA), highlighted Ghana's pipeline agreement with Burkina Faso as a shining example of regional collaboration that boosts petroleum supply and security. He emphasized the importance of expanding partnerships across West Africa to tackle energy challenges.

According to Abdul-Hamid, a common currency, upgraded infrastructure, and coordinated efforts are crucial for addressing the region's energy issues. He stressed that African nations must share resources to build economic resilience, noting that sustainable growth is impossible if pursued individually. Abdul-Hamid aptly put it, “Pooling human and infrastructure resources across the region can significantly strengthen our economy.”

In essence, Abdul-Hamid is championing regional cooperation to drive economic growth and energy security in West Africa. By sharing resources and expertise, African nations can overcome challenges and achieve sustainable development.

Abdul-Hamid, CEO of Ghana's National Petroleum Authority, emphasized the need for West African nations to harmonize their regulatory policies under the ECOWAS framework to facilitate smoother trade across borders. He acknowledged the African Continental Free Trade Area (AfCFTA) as a valuable platform for cooperation but noted that foreign exchange challenges persistently hinder regional trade. “Heavy reliance on the U.S. dollar for petroleum imports places constant pressure on local currencies, raising prices and reducing purchasing power,” he explained.

To address this issue, Abdul-Hamid recommended adopting a unified West African currency to mitigate foreign exchange fluctuations and bolster economic stability. This move would reduce dependence on the U.S. dollar and promote regional economic resilience.

In terms of shared infrastructure, Abdul-Hamid stressed the importance of coordinated investments to enhance economic resilience. He highlighted the benefits of a shared pipeline infrastructure, citing reduced transportation expenses and improved distribution efficiency within West Africa. “Transporting petroleum by road is both costly and risky, with hazards such as banditry. A shared pipeline infrastructure is safer and more cost-effective,” he noted.

Benefits of a Unified Currency and Shared Infrastructure:

Reduced Dependence on U.S. Dollar: Minimizes pressure on local currencies and stabilizes prices

Enhanced Economic Resilience: Fosters regional cooperation and economic stability

Improved Trade Efficiency: Streamlines trade processes and reduces transaction costs

Increased Safety: Shared pipeline infrastructure reduces risks associated with road transportation, such as banditry.

Abdul-Hamid highlighted the Ghana-Burkina Faso pipeline agreement as a strategic move to reduce dependence on tanker transport and ensure a steady fuel supply. This initiative is expected to bolster economic resilience in the region. “This reform supports alliances among importers, enhancing business success and broader economic stability,” Abdul-Hamid noted, emphasizing the benefits of regulatory policies that enable fuel marketers to share storage facilities.

Oluwatosin Aina, Group Head of Energy at First Bank of Nigeria, echoed Abdul-Hamid's sentiments, advocating for a unified African currency to mitigate the challenges posed by dollar-based transactions. Aina pointed out that transactions with refineries like Dangote Refinery and Ghana's Sentuo Oil Refinery are dollar-denominated, which puts pressure on local currencies like the naira. “Heavy reliance on the U.S. dollar for petroleum imports places constant pressure on local currencies, raising prices and reducing purchasing power,” Abdul-Hamid explained, underscoring the need for a unified currency to strengthen economic stability across the region.

The Ghana-Burkina Faso pipeline agreement is a significant step towards regional cooperation, and experts believe that similar initiatives can help address energy challenges in West Africa. By promoting economic collaboration and reducing reliance on foreign currencies, African nations can foster sustainable growth and development.

Benefits of Regional Cooperation:

Enhanced Energy Security: Reduced dependence on tanker transport and steady fuel supply

Economic Resilience: Encourages collaboration among importers and supports business success

Unified Currency: Mitigates pressure on local currencies and promotes economic stability

The end of Nigeria's fuel subsidy has opened up new investment opportunities in the downstream and midstream sectors, making it easier for banks to fund petroleum imports, according to Aina. However, she also highlighted the challenges posed by dollar transactions, which put a strain on regional currencies. To address this, Aina suggested that boosting non-oil exports would help increase foreign exchange inflows.

Aina also advocated for a unified currency model, similar to the euro in the European Union, which has stabilized exchange rates for Francophone African countries and made them less vulnerable to currency fluctuations. She proposed that Anglophone nations could adopt a similar approach to enhance trade and economic stability. This would involve harmonizing fiscal policies, petroleum infrastructure, and regulatory standards to better address foreign exchange volatility and ensure stable, affordable fuel prices across West Africa.

Both Abdul-Hamid and Aina emphasized the need for unified infrastructure and currency reforms in Africa. They argued that by working together, West African countries can create a more stable and prosperous economy. This would involve investments in shared infrastructure, such as pipelines, and coordinated efforts to address energy challenges.

Benefits of a Unified Currency Model:

Stabilized Exchange Rates: Reduced volatility and fluctuation in exchange rates

Increased Economic Stability: Better management of foreign exchange inflows and outflows

Improved Trade: Simplified trade processes and reduced transaction costs

Enhanced Cooperation: Fostered regional cooperation and economic integration

Challenges and Opportunities:

Compliance and Enforcement: Ensuring that all stakeholders comply with new regulations and standards

Capacity and Expertise Development: Developing local expertise and infrastructure to support new investments

Financial and Investment Barriers: Securing funding for infrastructure development and capacity building initiatives.