Page 5 - DMEA Week 03 2023

DMEA COMMENTARY DMEA

of mismanagement, leaving the only refining crude and puts no stress on payment, as we will
capacity split among several small, privately pay only $2 on every barrel supplied,” he added.
owned modular refineries.
This has meant that despite being Africa’s Economic impact
largest producer and exporter of oil, Nigeria is Expectations for the refinery’s impact are high.
almost completely reliant on imports to satisfy The Governor of the Central Bank of Nigeria
local demand for fuel. Nigeria, though, is set for (CBN), Godwin Emefiele, said previously that
a refining revolution, with the start-up of Dan- the unit would significantly reduce Nigeria’s
gote soon to be accompanied by the re-launch of commodity import bill.
first, Port Harcourt, then the other NNPC assets, Speaking at a meeting of the International
which are currently undergoing major rehabili- Monetary Fund (IMF) in Washington last year,
tation work. he said: “With Dangote Refinery coming up
with the 650,000 barrel per day, hopefully by the
Project finance end of the year, that will reduce the demand for
In keeping with a previous agreement signed in foreign exchange that normally will go for the
August 2021, NNPC in July paid an initial $1bn importation of petroleum products.”
instalment towards obtaining a 20% stake in He added: “I have also said that between the
the refinery. This valued the project at around importation of refined petroleum products and
$14bn, below the $15-16bn valuation previously other products like rice, sugar and wheat, we
touted. Term sheets were signed by NNPC and spend close to about 40% of the foreign exchange
Dangote Group, with talks continuing regarding that is needed to fund imports into Nigeria … if
the financing of the acquisition. we find, for instance, a situation whereby around
Further funding for the refinery had the end of this year we no longer need foreign
been obtained with a loan from the African exchange to import petroleum product, rice or
Export-Import Bank (Afreximbank). Signed maize, I believe that the demand will drop.”
in November, the loan is in keeping with Afrex- Dangote is also set to be able to produce
imbank’s other projects, including its support for 690,000 tonnes per year of polypropylene (PP),
the renovation of Nigeria’s oldest refinery, Port 240,000 tpy of propane, 32,000 tpy of sulphur
Harcourt. Considering NNPC’s poor perfor- and 500,000 tpy of carbon black, on top of its
mance record, the Dangote deal is a vital compo- refining capabilities. This will provides enough
nent for its revised strategy for the downstream petroleum products to cover all of Nigeria’s
sector. domestic demand.
Aliko Dangote was, however, not reported According to Kyari, the combined efforts to
not to have been enthusiastic at the prospect upgrade older facilities and Dangote’s comple-
of NNPC’s involvement in the project. NNPC tion would be sufficient to stop imports alto-
managing director Mele Kyari said in July that gether by 2023. He added that Nigeria would
“[Dangote] didn’t ask for it. It’s our decision to become a hub of petroleum product exports to
take equity. We made this decision three years the rest of the world, and not only be limited to
ago much earlier. It’s not what he wants, but they West Africa.
are also aware that they operate in a resource-de- Dangote’s commissioning is predicted to cre-
pendent country. We made a request and it’s the ate an $11bn per year market in Nigerian petro-
policy of government that we take interest in this leum products, providing a significant boost for
refinery.”Local media outlet The Whistler quoted the local economy. An increased export market
an NNPC official as saying: “We have made the for Nigerian products would allow an increase its
payments. We paid $1bn, the balance is subject foreign exchange earnings, additionally, provid-
to plant start-up and tied to crude supply. It was ing thousands of jobs and further opportunities
a very ingenious deal. It locks market for our for people living in the nearby area.™

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