Across Nigeria, anticipation is building around the launch of the new Dangote oil refinery, set to begin operation in a few days. With an estimated cost of $18 billion, the refinery is expected to reduce oil import dependence by up to 36 percent. By processing 650,000 barrels of crude oil daily into refined petroleum products, the refinery aims to transform Nigeria into an oil refining country rather than solely an oil exporter. Expectations are also high on what it could do for the labour market as the project will generate a total of 4,000 direct and 145,000 indirect jobs during different phases of the project.
Undoubtedly, Nigeria’s oil industry which has been on a steep downtrend stands to gain significantly from one of Africa’s top infrastructural projects. Yet, so will other industries. Specifically, the Dangote refinery’s upcoming production of key materials like naphtha and polypropylene is set to revive the cosmetics, and detergent industry.
Why Nigeria’s cosmetics and detergent industry?
Petrochemicals derived 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 utilized as emollients, surfactants, emulsifiers, and thickeners. These serve as active ingredients for skin smoothing, product foaming, and thickening. These byproducts of the oil and gas industry are the most profitable portion of the barrel for oil companies and cost-effective for beauty companies. Most oil companies sell petrochemicals to make up for losses from the switch to renewable energy sources by selling petrochemicals. And in turn, the beauty and home care industry helps them effectively recycle refinery waste.
Unfortunately, in Nigeria, many of these beauty and home care companies have been struggling with access to these raw materials. In recent years, many manufacturers of fast-moving consumer goods, both indigenous and international, have suspended production of detergents, and cosmetics, due to the difficulties in sourcing raw materials. An example is the recent case of Unilever, one of the country’s oldest manufacturing companies, which recently shut down operations of its home and skincare brands in the country. One of the reasons the company couldn’t scale its operations was that it had become heavily import-dependent for some of its essential raw materials. “They were banking on the imports and strategic relationships they had especially in Asia and other countries to bring in imported things at cheaper cost,” said Uchenna Uzo, a consumer expert and faculty director at the Lagos Business School in a recent Business day article. It doesn’t help that some of the raw materials needed by these companies are on the FX prohibition list. This is where having an operational refinery within the country comes in. Getting these materials locally through the refinery reduces costly imports and makes manufacturing easier.
The other side of the barrel
However, relying entirely on the Dangote refinery to save the day may not be ideal. Despite being a work in progress, the refinery is already burdened with great anticipation due to its potential impact on Nigeria’s economy. Moreover, based on past announcement patterns , there are still lingering concerns that the refinery actually commencing operations may further than we expect. Initially, it was announced that the refinery would begin operations in 2020, then the timeline was been pushed to H1 2021. And finally, 2023.
Nigerian industries also have an infamous reputation for inefficiently utilizing available resources, which means that the refinery could have no realistic impact on the cosmetics industry. Moreover, the use of fossil fuels as raw ingredients for beauty and home care products may soon end. Many home care brands are shifting away 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’re fossil fuel, petrochemical free. Nigeria also recently committed to its efforts to reduce its overall carbon footprint by launching a Carbon Tax policy, in line with its efforts to reduce greenhouse gas emissions in the country. Yet the dream of producing petrochemical free products in Nigeria may still be just that, a dream. Alternative options to fossil fuel ingredients are still developing, and in most cases, they come at a higher costs and sometimes inferior performance. This means the reliability and ubiquity of petrochemicals still makes them a preferred choice for the beauty and home care industry.
Regardless of what the new refinery’s involvement with the cosmetics and detergent industry turns out to be, the bottom line remains that Nigeria’s cosmetics industry needs a jolt. Latest figures show the beauty and personal care industry market is predicted to grow by 16.48% (2023-2027) resulting in a market volume of US$14.49bn in 2027. oiled by a steady rise in disposable incomes among the continent’s middle class. While challenges may exist, the demand for cosmetics and home care products remains strong, and leveraging the available resources can help drive growth and sustainability in the industry, ultimately contributing to the economic development of Nigeria.