The underdevelopment of OML 71 and 72, located in the Southeastern Niger Delta near Bonny Island, reflects a critical gap in Nigeria’s drive to increase crude oil output. Operated by West African Exploration and Production Company (WAEP) — 45% owned by the Dangote Group with minority participation from First Exploration and Petroleum Development Company, and 55% by the Nigerian National Petroleum Company (NNPC) — the assets are yet to reach full production capacity. OML 71, currently undergoing Long-Term Well Testing, has its first oil target of about 20,000 barrels per day delayed to late 2024.
This delay underscores ongoing challenges in project execution, funding, and field development. For Nigeria, this setback limits short-term crude supply growth and delays gains in foreign exchange and energy security. Accelerating indigenous field development like OML 71 and 72 is therefore essential to meeting national production targets and reducing reliance on International Oil Companies (IOCs).
I appreciate the depth of your argument, but I think some points deserve a second look. It seems you frame Dangote’s success mainly through a trader mindset, yet the shift from trading to large scale production could also be seen as a step toward industrial maturity, even if imperfect. High margins in Nigeria may reflect systemic costs like poor infrastructure and currency swings, not just greed or protectionism.
Also, calling the trader mentality the core obstacle might overlook how weak public institutions and inconsistent policy create an uneven field for any manufacturer. The government’s role in regulation, logistics, and financing probably weighs heavier on outcomes than corporate culture alone.
Your broader point about who really benefits from industrialisation is valid, but maybe the real challenge is not just changing mindsets. It is building the state capacity and market stability that make true competition possible.
I’m tired tired TIRED of this argument that high margins in Nigeria reflect higher costs. You have to pick one because you can’t have it both ways. Nigeria cannot be a high cost environment and high margin market at the same time. This is illogical. Only one can be true at a time.
I see your point, but high cost and high margin can absolutely coexist when a firm controls pricing. China National Tobacco is a clear case. It faces heavy costs from regulation and logistics yet still posts margins above 70 percent because it dominates a protected market.
So the issue is not logical inconsistency
it’s market power. When competition is weak, companies can charge well above cost, no matter how expensive their operations are.
We are in agreement. My point is that they are not linked in the way people try to claim they are. High margins are not because of high costs. Where they exist together it is because of pricing power. Without pricing power, a high cost producer surely cannot magic high margins out of thin air. In Dangote's case, government is doing a lot of the heavy lifting by protecting him from competition. His costs are not high, in fact it is because they are low that they help to boost his margins, especially in cement
In a previous FOOD episode, I hoped this wouldn't be the case, even though the signs were there. Naively I assumed at least they will give it some years before implementing the disastrous policy. Oh sweet summer child I was.
Allowing Dangote to keep importing crude oil while his oil wells remain underdeveloped may help fuel supply in the short term but is not in Nigeria’s best interest.
The Dangote Refinery expansion creates jobs and boosts refining capacity, yet it relies mainly on imported crude rather than local production. This approach increases foreign exchange outflow and weakens Nigeria’s long-term energy security.
OML 71 and 72, owned mjorly by Dangote,near Bonny Island, remain largely undeveloped even though they could supply part of the crude needed for the refinery. The delayed production from these fields limits Nigeria’s crude output and potential revenue. As a result, the country continues to depend on imported crude despite its vast oil reserves.
To strengthen crude supply, foreign reserves, and self-sufficiency, Nigeria must accelerate the development of indigenous oil fields and reduce reliance on International Oil Companies for crude supply. Aligning upstream production with refinery operations will ensure sustainable growth and national energy stability.
So many questions in my head. Dangote refinery is the reason why petrol price was inflated from 250 to 400 then to this current price? How???? And Why???
The reasoning is straightforward: imported petrol, even after accounting for shipping costs, somehow arrives in Lagos at prices below those of Dangote’s domestically refined product. This state of affairs is deemed untenable, and the proposed remedy is thus to inflate the price of imports sufficiently to preserve Dangote’s competitive position.
So my question is: before this refinery of a thing have the prices been fair? The subsidy removal what's the point?
I don't understand the last chart you dropped. The evidence that Dangote's refinery can't meet local consumption is that there were still imports? Seems kind of weird. It is possible that even though he can meet local consumption, importers are still able to sell to the market.
You also suspect that Dangote's locally refined product is more expensive that imported products, and your evidence is that products imported to Nigeria via Lome are still more expensive than Dangote's?
Great article as always folks. Is there an argument to be made broadly around state maturity. One where the state had to make industrialization in key sectors extremely attractive (including picking winners in Dangote’s case) to get the first tranche of players to enter risky spaces. In future phases, the proliferation of talent, expertise and (hopefully) a strategic pivot by the government to fostering competition drive innovation and prices down.
Counterpoint to the above argument is that this has not happened in Cement yet.
The trading mentality is VERY old culturally and entrenched. See Mansa Musa
The underdevelopment of OML 71 and 72, located in the Southeastern Niger Delta near Bonny Island, reflects a critical gap in Nigeria’s drive to increase crude oil output. Operated by West African Exploration and Production Company (WAEP) — 45% owned by the Dangote Group with minority participation from First Exploration and Petroleum Development Company, and 55% by the Nigerian National Petroleum Company (NNPC) — the assets are yet to reach full production capacity. OML 71, currently undergoing Long-Term Well Testing, has its first oil target of about 20,000 barrels per day delayed to late 2024.
This delay underscores ongoing challenges in project execution, funding, and field development. For Nigeria, this setback limits short-term crude supply growth and delays gains in foreign exchange and energy security. Accelerating indigenous field development like OML 71 and 72 is therefore essential to meeting national production targets and reducing reliance on International Oil Companies (IOCs).
I appreciate the depth of your argument, but I think some points deserve a second look. It seems you frame Dangote’s success mainly through a trader mindset, yet the shift from trading to large scale production could also be seen as a step toward industrial maturity, even if imperfect. High margins in Nigeria may reflect systemic costs like poor infrastructure and currency swings, not just greed or protectionism.
Also, calling the trader mentality the core obstacle might overlook how weak public institutions and inconsistent policy create an uneven field for any manufacturer. The government’s role in regulation, logistics, and financing probably weighs heavier on outcomes than corporate culture alone.
Your broader point about who really benefits from industrialisation is valid, but maybe the real challenge is not just changing mindsets. It is building the state capacity and market stability that make true competition possible.
I’m tired tired TIRED of this argument that high margins in Nigeria reflect higher costs. You have to pick one because you can’t have it both ways. Nigeria cannot be a high cost environment and high margin market at the same time. This is illogical. Only one can be true at a time.
It is a very strange argument to say the least. Like it is so hard to do business in Nigeria, you earn extraordinarily high profits in return.
I see your point, but high cost and high margin can absolutely coexist when a firm controls pricing. China National Tobacco is a clear case. It faces heavy costs from regulation and logistics yet still posts margins above 70 percent because it dominates a protected market.
So the issue is not logical inconsistency
it’s market power. When competition is weak, companies can charge well above cost, no matter how expensive their operations are.
We are in agreement. My point is that they are not linked in the way people try to claim they are. High margins are not because of high costs. Where they exist together it is because of pricing power. Without pricing power, a high cost producer surely cannot magic high margins out of thin air. In Dangote's case, government is doing a lot of the heavy lifting by protecting him from competition. His costs are not high, in fact it is because they are low that they help to boost his margins, especially in cement
At this point, I am earnestly waiting for a book on this F.O.O.D framework. Omo.
Truly, the men who didn't build Nigeria.
But set it up to be milked.
In a previous FOOD episode, I hoped this wouldn't be the case, even though the signs were there. Naively I assumed at least they will give it some years before implementing the disastrous policy. Oh sweet summer child I was.
Allowing Dangote to keep importing crude oil while his oil wells remain underdeveloped may help fuel supply in the short term but is not in Nigeria’s best interest.
https://www.facebook.com/share/v/1CWWHZ8ffy/
The Dangote Refinery expansion creates jobs and boosts refining capacity, yet it relies mainly on imported crude rather than local production. This approach increases foreign exchange outflow and weakens Nigeria’s long-term energy security.
OML 71 and 72, owned mjorly by Dangote,near Bonny Island, remain largely undeveloped even though they could supply part of the crude needed for the refinery. The delayed production from these fields limits Nigeria’s crude output and potential revenue. As a result, the country continues to depend on imported crude despite its vast oil reserves.
To strengthen crude supply, foreign reserves, and self-sufficiency, Nigeria must accelerate the development of indigenous oil fields and reduce reliance on International Oil Companies for crude supply. Aligning upstream production with refinery operations will ensure sustainable growth and national energy stability.
So many questions in my head. Dangote refinery is the reason why petrol price was inflated from 250 to 400 then to this current price? How???? And Why???
The reasoning is straightforward: imported petrol, even after accounting for shipping costs, somehow arrives in Lagos at prices below those of Dangote’s domestically refined product. This state of affairs is deemed untenable, and the proposed remedy is thus to inflate the price of imports sufficiently to preserve Dangote’s competitive position.
So my question is: before this refinery of a thing have the prices been fair? The subsidy removal what's the point?
I don't understand the last chart you dropped. The evidence that Dangote's refinery can't meet local consumption is that there were still imports? Seems kind of weird. It is possible that even though he can meet local consumption, importers are still able to sell to the market.
You also suspect that Dangote's locally refined product is more expensive that imported products, and your evidence is that products imported to Nigeria via Lome are still more expensive than Dangote's?
Great article as always folks. Is there an argument to be made broadly around state maturity. One where the state had to make industrialization in key sectors extremely attractive (including picking winners in Dangote’s case) to get the first tranche of players to enter risky spaces. In future phases, the proliferation of talent, expertise and (hopefully) a strategic pivot by the government to fostering competition drive innovation and prices down.
Counterpoint to the above argument is that this has not happened in Cement yet.
The key is the state encouraging local competition, which drives down cost
But What can we do? Should we just accept our fate?
Multiple Nigerians now have to once more rely on a system that's faulty even though is pivotal to their well being.
Sad
At this point, it won’t be absurd to say Dangote is more powerful than any Nigerian alive.
*African.