Global Courant 2023-05-22 16:15:25
The launch of the new one is being anticipated all over Nigeria Dangote Oil Refinery, set to begin operations in a few weeks. With an estimated cost of $18 billion, the refinery is expected to reduce dependence on oil imports by as much as 36 percent. By processing 650,000 barrels of crude oil per day into refined petroleum products, the refinery aims to transform Nigeria into an oil refinery country rather than just an oil exporter. Expectations are also high about what it could mean for the job market, as the project is a total of 4,000 direct and 145,000 indirect jobs during different phases of the project.
Undoubtedly, Nigeria’s oil industry, which is at a steep downward trend will benefit significantly from one of Africa’s largest infrastructure projects. Yet other industries will too. In particular, the upcoming production of key materials such as naphtha and polypropylene at the Dangote Refinery will revitalize industries such as the cosmetics and detergent industries.
Why the Cosmetics and Detergent Industry in Nigeria?
Petrochemicals from the oil and gas industry serve as key ingredients in beauty and personal care products. These petrochemicals, such as mineral oil, petrolatum and sodium lauryl sulfate (SLS), are used as emollients, surfactants, emulsifiers and thickeners. These serve as active ingredients for skin smoothing, lathering and thickening of the product. These by-products of the oil and gas industry are the most profitable part of the barrel for oil companies and cost-effective for beauty companies. Most oil companies sell petrochemicals to offset losses from switching to renewable energy sources by selling petrochemicals. And in turn, the beauty and home care industry helps them recycle refinery waste effectively.
Unfortunately, many of these beauty and home care companies in Nigeria have difficulty accessing these raw materials. In recent years, many manufacturers of fast-moving consumer goods, both indigenous and international, have halted production of detergents and cosmetics due to the difficulties of sourcing raw materials. An example is the recent case of Unilever, one of the oldest manufacturing companies in the country, which recently ceased operations of its home and skin care brands in the country. One of the reasons the company was unable to scale its operations was that it had become heavily dependent on imports for some of its essential raw materials. “They were counting on the imports and strategic relationships they had, especially in Asia and other countries, to bring in imported things at a lower cost,” said Uchenna Uzo, a consumer expert and faculty director at Lagos Business School. It doesn’t help that some of the commodities these companies need are on the FX ban list. Here’s Hsetting up an operational refinery in the country will come in handy. Getting these materials through the refinery locally reduces costly imports, makes production easier, and utilizes the country’s abundant resources.
The other side of the barrel
However, relying entirely on the Dangote Refinery to save the day is not ideal. Despite being a work in progress, the refinery is already weighed down by high expectations due to its potential impact on Nigeria’s economy. In addition, due to past situations, there are still concerns that the refinery launch will not proceed as planned. The facility, which was initially expected to be ready in 2020, was first moved to 2021. Then, in August 2022, the time had come announced that launch was moved to 2023.
In addition, the use of fossil fuels as a raw material for beauty and home care products may soon come to an end. Many home care brands are refraining from using fossil fuels in production, as they are unsustainable and contribute to climate change. These brands are confronting the whole use of petrochemicals in formulations by using bio-based ingredients or promoting that they are fossil fuel, petrochemical free. Nigeria also recently concerned to its efforts to reduce its overall carbon footprint by launching a carbon tax policy, in line with its efforts to reduce the country’s greenhouse gas emissions. But the dream of producing petrochemical-free products in Nigeria may still be just that, a dream. Alternative options to fossil fuel ingredients are still under development, and in most cases are associated with higher costs and sometimes lower performance. This means that the reliability and ubiquity of petrochemicals still make them the preferred choice for the industry.
Whatever the involvement of the new refinery in the cosmetics and detergent industry turns out to be, the bottom line is that the Nigerian cosmetics industry needs a shake-up. Last figures show that the beauty and personal care products market is expected to grow at a rate of 16.48% (2023-2027), resulting in a market volume of $14.49 billion by 2027. Oiled by a steady rise in disposable income among the middle class of the continent. While there may be challenges, the demand for cosmetics and home care products remains high, and leveraging the available resources can help drive growth and sustainability in the industry, ultimately contributing to Nigeria’s economic development.