The $19billion Dangote Refinery, expected to be Africa’s biggest oil refinery facility in 2022, will not solve Nigeria’s foreign exchange challenges, Bismarck Rewane, an economist and Chied Executive Officer (CEO) of Financial Derivative Company has said.
This comment by Rewane contradicted the views of the Governor, Central Bank of Nigeria(CBN) Godwin Emefiele that Dangote’s refinery will go a long way in resolving Nigeria ‘s forex crisis.
Emefiele at a recent foreign investors’ meeting in New York, had stated that Nigeria’s import of petroleum products that accounts for 30 percent of its forex can be reversed by the successful commencement of operations at the Dangote Refinery.
He noted:“The Dangote refinery once it begins production would be a major FX saving source for Nigeria,” the Governor said, adding that “if the 650,000” daily barrels that will be produced from the refinery will “be sold in Naira it would be a major FX saver for Nigeria
Rewane, though acknowledged that the 650,000 barrels per day (bpd) integrated refinery and petrochemical project will help in reducing Nigeria’s petroleum refining cost as well as the cost of transportation, but said the plant would not help Nigeria to earn the much-needed US dollar to meet its FX needs.
“Dangote refinery as a silver bullet to solving Nigeria’s foreign exchange problem is a misunderstanding of the facts. It will help in reducing refining cost, it will help in reducing transportation cost but it is the oil that you are going to export that will give you a dollar,,”
Accord to him, outputs from the refinery woudl be refined and used here, saying that it was about understanding the difference between necessary and sufficient conditions.
Nigeria’s dollar supply challenges come from its dependency on the foreign earnings from crude oil, which has continued to account for over 90 percent of its dollar source.
Although on the rise, the falling global crude price always reduces dollar supply in Nigeria which consequently leads to the naira devaluation.
The continuous devaluation of Nigeria’s local currency has remained a key concern for both local and foreign investors who are looking to preserve the purchasing power of their savings and investments. Foreign investors have had their money trapped in Nigeria’s debt market since March 2020 amid a dollar shortage.
Rewane said it was “ mental laziness which a lot of people indulge in to just think that by June next year Nigeria’s FX would be solved due to the commencement of the Dangote refinery, Rewane said.
Under construction in the Lekki Free Zone near Lagos, the Dangote refinery is expected to process a variety of light and medium grades of crude to produce Euro-V quality clean fuels including gasoline and diesel as well as jet fuel and polypropylene.
