Monday, March 01, 2021 /10:55 AM / By CSL Research/ HeaderImage Credit: Dangote
Last week, the Governor of Central Bank of Nigeria (CBN), MrGodwin Emefiele, during an inspection tour of the US$15bn Dangote Refinery,Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline project that isnearing completion in Lagos state noted that the plant will save the country'sforeign exchange as the importation of petroleum products will stop.
He further stated that the facility will sell the refinedcrude to the Federal Government in Naira. The facility which is expected toproduce 650,000 bpd of refined petroleum, is Africa's biggest oil refinery andthe world's biggest single-train facility.
Over the years, successive governments have tried to revivethe country's ailing refineries with no evident results. Consequently, over 80%of the refined petroleum products consumed in Nigeria are imported. The FederalGovernment provided fuel subsidy which reduced the pump price of petroleumproducts until last year, 2020, when the Minister of Petroleum announced theend of the subsidy regime.
However, the recent rise in crude oil prices that hasresulted in an increase in the landing cost of petrol to c.N180 per litre whichexceeds the current price of between N162-N165 per litre means that the countrymay have temporarily returned to the subsidy regime. Besides, protracted yearsof delay and disagreements on the oil and gas reform bill have mutedinvestments in improving the entire value chain of the industry. Currently, thecombined capacity utilization of the existing refineries stands at 0.00% due tothe ongoing revamping of the state-owned refineries according to available datafrom the Nigerian National Petroleum Corporation (NNPC).
Dangote'sintegrated refinery has enormous economic potentials given its capacity to meetlocal demand and serve the needs of neighbouring countries. At a time when theFederal Government is exploring possible options to alleviate the pressure onforeign exchange reserves, the project will enable the government to conservethe much needed foreign exchange expended on the importation of petroleumproducts.
Nigeria'sdaily demand for refined crude oil was estimated to be around 442,000bpd as of2018, implying that Dangote Refinery alone with its 650,000bpd capacity canmore than meet local demand, and earn FX for the country through exports.
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