Page 4 - DMEA Week 09 2021

DMEA COMMENTARY DMEA

Dangote the saviour as

Nigeria eyes benefits

Following decades of underinvestment in the country’s refining
sector, Nigerian authorities can barely hide their excitement about

the prospect of Africa’s largest refinery launching early next year.

AFRICA THE construction of Aliko Dangote’s Nigerian becomes very clear. We are also very optimistic
refining project continues to be hailed as the sav- that by refining this product here in Nigeria, all
iour of the country’s downstream sector, but its those costs associated with either demurrage
WHAT: potential for far wider positive impact is becom- from import, costs associated with freight, will
The launch of the Dangote ing clear. be totally eliminated.”
refinery will transform At 650,000 barrels per day (bpd), the $15bn Based on this approach, the governor antici-
Nigeria’s downstream Dangote Group plant in the Lekki free trade zone pates that refined products will become cheaper
sector overnight. (FTZ) near Lagos will be Africa’s largest, offering in the domestic market.
significant economies of scale. While its open- Meanwhile, the strength of the currency also
WHY: ing was recently pushed back from Q4 2021 to could be boosted by naira-denominated export
NNPC has failed to early 2022, when it does come on stream, it has sales. Emefiele said: “If we are lucky that what the
maintain its existing the potential to transform Nigeria’s downstream refinery produces is more than we need locally,
refineries and there instantly from basket case to the continent’s ris- you will see Nigerian businessmen buying
are hopes that this new ing star. small vessels to take them to our West African
private sector giant can Its prospective impact is made all the clearer neighbours to sell to them in naira … This will
help drag the sector back when taking into consideration that state-owned increase our volume in naira and help to push it
on to its feet. Nigerian National Petroleum Corp. (NNPC) has into the Economic Community of West African
not carried out turnaround maintenance (TAM) States as a currency.”
WHAT NEXT: work at its three refining complexes for around
With plans to buy and 44 years, and its full 445,000 bpd capacity is An end to subsidies
sell in naira, the Dangote offline pending overhaul. Such a boon brings into focus Nigeria’s lengthy
refinery is seen as the While there remains uncertainty about the and high-profile struggles with fuel subsidies,
saviour of Nigeria’s volume of Dangote’s output that will be sold which were abolished last year. Emefiele touched
foreign exchange domestically, its completion is expected to bring on this, adding that the launch of the new refin-
reserves, with hopes of economic and regulatory reform as well as pro- ery would bring the artificially low-price regime
easing reliance on fuel viding a boost to the local job market. to an end.
marketers. Speaking this week, the governor of the Cen- He said: “I am saying that by this time next
tral Bank of Nigeria (CBN), Godwin Emefiele, year, our cost of import of petroleum products
said that Dangote has provided assurances that for petrochemicals or fertiliser will be able to
its purchase of Nigerian crude would not have an save that which will save Nigeria’s reserve.” The
impact on the country’s 1.6mn bpd mandatory banker added: “It will help us so that we can
export volume allocated by OPEC. begin to focus on more important items that we
cannot produce in Nigeria today.”
Naira boost However, NNPC spokesman Kennie Obat-
Emefiele said that the refinery would conduct its eru announced this week that fuel prices would
trade in naira, alleviating a significant burden on remain at January and February levels through-
the state’s foreign exchange reserves. out March despite the increasing cost of feed-
He estimated that around 41% of Abuja’s stock, suggesting that the state would return to
foreign exchange spend could be avoided if subsidise fuels.
petroleum products were sourced locally and He said that prices would not change so as
purchased in naira. “not to jeopardise ongoing engagements with
“Based on agreement and discussions with organised labour and other stakeholders on an
[NNPC] and the oil companies, the Dangote acceptable framework that will not expose the
Refinery can buy its crude in naira, refine it and ordinary Nigerian to any hardship”.
produce it for Nigerians’ use in naira,” he said. Speaking to Downstream MEA (DMEA), Ian
Emefiele added: “That is the element where Simm, principal advisor at strategy consultancy
foreign exchange is saved for the country IGM Energy, said: “If anyone can permanently

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