Page 5 - AfrOil Week 09 2021

AfrOil COMMENTARY AfrOil

“Based on agreement and discussions with Industry Bill (PIB) that allows only companies
[NNPC] and the oil companies, the Dangote with an active refining licence to import petro-
Refinery can buy its crude in naira, refine it and leum products, arguing that this would encour-
produce it for Nigerians’ use in naira,” he said. age private investment in the downstream
Emefiele added: “That is the element where sector.
foreign exchange is saved for the country In a presentation to members of the National
becomes very clear. We are also very optimistic Assembly’s PIB joint committee, Dangote
that by refining this product here in Nigeria, all Group’s chief strategy officer, Aliyu Suleiman,
those costs associated with either demurrage recommended a backward integration policy be
from import, costs associated with freight, will applied in the downstream sector to encourage
be totally eliminated.” investment in local refining.
Based on this approach, the governor antici- According to Nigeria’s Punch daily, he said:
pates that refined products will become cheaper “Nigeria is exceptional in being a major oil pro-
in the domestic market. ducer with near-zero refining capacity,” adding
Meanwhile, the strength of the currency also that while the Dangote unit will help address The launch of the
could be boosted by naira-denominated export this, there may be shortfalls during maintenance
sales. Emefiele said: “If we are lucky that what the or amid a growth in demand. new refinery will
refinery produces is more than we need locally, “To support this, [a] licence to import any
you will see Nigerian businessmen buying product shortfalls should be assigned only to bring Nigeria’s
small vessels to take them to our West African companies with active refining licences. Import
neighbours to sell to them in naira … This will volume to be allocated between participants artificially low
increase our volume in naira and help to push it based on their respective production in the fuel price regime
into the Economic Community of West African preceding quarter. Such import will be done
States as a currency.” under the [direct sale-direct purchase] scheme,” to an end
he suggested.
An end to subsidies In support of this recommendation, Sulei-
Such a boon brings into focus Nigeria’s lengthy man said that imported fuels are generally of a
and high-profile struggles with fuel subsidies, very low quality, noting that imported petro-
and Emefiele touched on this, adding that the leum products must conform to the 50 ppm
launch of the new refinery would bring the arti- sulphur Afri-5 standard.
ficially low price regime to an end. Given Nigeria’s miserable recent track record
He said: “I am saying that by this time next in maintaining its refineries and following years
year, our cost of import of petroleum products of deal announcements that have brought no
for petrochemicals or fertiliser will be able to change, not so long ago it would have been easy
save that which will save Nigeria’s reserve.” The to dismiss the Dangote project as another ambi-
banker added: “It will help us so that we can tious dream. However, the company has suc-
begin to focus on more important items that we ceeded where many others have not, and while
cannot produce in Nigeria today.” the project is still to be completed and launched,
Speaking to AfrOil, Ian Simm, principal its traction and influence have already brought
advisor at strategy consultancy IGM Energy, excitement to a sector that have been in chronic
said: “If anyone can relieve Nigeria from fuel decay for decades.
subsidies, it’s Dangote. He has the funding, the Meanwhile, anything it can do to ease Nige-
expertise, the contacts and, as is quite apparent ria’s heavy reliance on fuel marketers will go a
from the progress on his refinery, the desire to long way to helping cure its Dutch disease. In
bring about meaningful change.” collaboration with the growth of modular refin-
With these benefits in mind, it is little surprise ing which has already begun to decentralise fuel
that the central bank has provided NGN100bn availability and lessen the influence of market-
($26mn) of funding to the refinery and the Dan- ers, Abuja may have finally found a workable
gote Group’s petrochemical and fertiliser plants. downstream model, though it remains to be
However, this is pocket change for a pro- seen whether state involvement in the sector can
ject that has more than doubled in cost since become a force for good. ™
plans were first drawn up. Having previously
been quoted at $12bn, Emefiele said the price
tag “may be close to $15bn-16bn at this time”
because of interest.
He added: “When this project was contem-
plated, when it was still on the drawing board
about six years ago, before it started four years
ago, it was meant to be about $7.5bn.”

PIB
Given the transformative potential of the Dan-
gote project, the company has a unique oppor-
tunity to use its influence to bring improvements
to Nigeria’s industry legislation.
This week, the company called for a clause
to be included in the long-awaited Petroleum Aliko Dangote (File photo)

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