Nigeria’s newly operational Dangote oil refinery is making waves in the oil industry, rapidly increasing its gasoil exports to West Africa and capturing significant market share from European refiners.

According to traders and shipping data, this $20 billion refinery is already altering the landscape of oil exports in the region.

Despite currently producing a lower grade of gasoil than anticipated, due to pending restarts of key units needed for cleaner fuel production, the refinery has been actively seeking buyers in neighboring markets.

In May, Dangote’s gasoil exports soared to nearly 100,000 barrels per day (bpd), almost doubling the levels recorded in April, as per data from analytics firm Kpler.

The majority of these exports were directed to West African countries, with one shipment reaching Spain.

However, preliminary data for June shows a significant decline in gasoil volumes. Despite this, overall oil product exports, including fuel oil, naphtha, and jet fuel, remained robust at 225,000 bpd.

The rise of Dangote’s refinery has significantly impacted European markets. A European distillates trading source told Reuters, “The refinery has shifted the balance in West Africa.”

This shift is reflected in Kpler data, which shows that EU and UK gasoil exports to West Africa fell to a four-year low of 29,000 bpd in May.

Russian exports to the region also dropped to an eight-month low of 87,000 bpd in the same month.

In Nigeria, Dangote has been selling some high-sulphur gasoil, leading to disputes with local fuel retailers over responsibility for distributing the dirtier fuel.

The Petroleum Industry Bill passed in 2021 mandates a sulphur content of 50 parts per million (ppm) to align with sub-regional ECOWAS standards.

However, the regulator allowed the sale of gasoil with sulphur content above 200 ppm locally from the beginning of the year until June, giving local refineries and importers more time to comply with the new standard.

As European countries tighten regulations on high-sulphur gasoil exports, cargoes from the Dangote refinery have found a market in regions with more lenient motor fuel standards.

This shift is crucial as European refiners face increasing constraints, while West African countries continue to demand more fuel.

Earlier in May, Aliko Dangote, the Chairman of the Dangote refinery, stated that once fully operational, the refinery would supply products to West and Central African countries due to its capacity being too large for Nigeria alone.

This expansion underscores the refinery’s potential to reduce the $17 billion in oil imports into the continent and could even lead to the closure of some European refineries.

The refinery’s impact is evident with West Africa becoming the largest regional recipient of Europe’s gasoline exports in 2023, receiving roughly one-third of the continent’s average exports, which totaled 1.33 million barrels per day (bpd).

The Dangote refinery’s rapid ascent and substantial increase in gasoil exports mark a significant shift in the oil export dynamics of West Africa, promising to reshape the region’s energy landscape for years to come.

Guinness Nigeria Plc, one of the leading brewery companies in the country, has reported a financial downturn in its latest unaudited report for the nine months ending March 2024.

The company recorded a loss before tax of N60.45 billion, its first loss in five years while in the same period last year, the company reported N9.94 billion in profit.

The loss is attributed to a combination of increased operational expenses and significant foreign exchange (FX) pressures. Operating expenses surged by 9% from N44.43 billion to N48.50 billion.

This rise in costs, coupled with an 89% increase in FX loss to N83 billion, largely driven by a $22.5 million loan from its parent company and the float in exchange rate in 2023, severely impacted the company’s bottom line.

Despite these challenges, Guinness Nigeria’s revenue saw a notable increase of 27%, climbing to N220.30 billion from N172.47 billion the previous year.

This revenue growth was primarily due to increased local sales, indicating a strong market presence despite the financial hurdles.

Analysts at CardinalStone noted that the elevated cost pressures are expected to persist in the coming quarters, driven by rising inflation affecting locally sourced raw materials and foreign exchange volatility impacting imported products.

They anticipate a flattish EBIT margin of 10.1% for the full year 2023/2024, influenced by high energy prices and increased marketing expenses due to intense industry competition.

The challenging economic environment has led to a significant increase in the prices of many commodities.

Nigeria’s headline inflation hit a 28-year high of 33.95% in May, reflecting the declining purchasing power of consumers.

Despite the current financial setback, there is optimism about the future. Analysts expect a recovery in EBIT margin to 10.2% in the 2024/2025 fiscal year, supported by the localization of raw materials, improved export earnings, and reduced foreign currency exposure.

The recent acquisition of a majority stake by Tolaram, coupled with long-term licensing agreements, is anticipated to provide synergistic benefits and strong revenue growth.

Business activity in Nigeria reached its lowest point in seven months this June, according to the latest Purchasing Managers’ Index (PMI) report from Stanbic IBTC Bank.

The headline PMI dropped to 50.1 from 52.1 in May, indicating a near-stagnation in the Nigerian private sector.

The PMI readings above 50.0 signify an improvement in business conditions, while those below indicate deterioration.

The report attributes this slowdown to subdued demand and escalating price pressures, which have led to a deceleration in both output and new orders.

“June data signaled a broad stagnation of the Nigerian private sector as subdued demand and intense price pressures led to slowdowns in the growth of output and new orders. In turn, employment rose only fractionally,” the report stated.

There were clear signs of increasing inflationary pressures, with purchase prices, staff costs, and selling charges all rising more rapidly than in May.

The report highlighted that although new orders continued to rise, the rate of expansion was marginal and the weakest in the current seven-month growth period.

This sluggish demand was largely due to sharp price increases, which made it challenging for customers to commit to new projects.

“The Stanbic IBTC headline PMI dropped to a seven-month low of 50.1 points in June from 52.1 in May due to moderation in domestic demand amid the intensification of price pressures, leading to slowdowns in the growth of output and new orders,” said Muyiwa Oni, head of equity research West Africa at Stanbic IBTC Bank.

The PMI index, derived from a survey of 400 companies across agriculture, manufacturing, services, construction, and retail sectors, is a composite index based on five individual indexes with the following weights: new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent), and stock of items purchased (10 percent), with the delivery times index inverted to move in a comparable direction.

Oni further explained that new orders recorded near-stagnation as new business increased only marginally at the slowest pace in the current seven-month sequence of expansion.

Financial challenges at customers reportedly limited the ability of firms to fully benefit from any improvement in underlying demand.

“In line with the picture for new orders, output rose at a slower pace during June, settling at its weakest level in four months,” Oni added.

This downward trend poses challenges for the Nigerian economy, which has been grappling with various macroeconomic pressures.

The PMI findings come at a time when businesses in Nigeria are navigating through a complex economic landscape marked by inflation and a volatile global market.