The Federal Government may save about N35tn in fiscal expenditure within the next five years with the commencement of operations at the Dangote Refinery and Petrochemicals.
The Governor of the Central Bank of Nigeria, Godwin Emefiele, disclosed this on Monday during the ceremony to inaugurate the Dangote Petroleum Refinery and Petrochemical facility in Ibeju-Lekki, Lagos.
The President, Major General Muhammadu Buhari (retd.), who inaugurated the refinery, which is currently the world’s largest single-train petroleum refiner, said his regime had been deliberate about ensuring public-private partnerships.
He described the refinery as a milestone for the Nigerian economy and a game-changer for the downstream petroleum market in the African continent.
Buhari said, “I recall that just about a year ago, I was here to commission your fertilizer (plant) and had the opportunity to briefly inspect this refinery complex which was under construction. The Group Chairman, Aliko Dangote, assured me that the refinery will be ready for commissioning before the end of my tenure.
“I’m aware that this is not the first time that the Dangote Group under Alhaji Aliko Dangote’s leadership is putting Nigeria on the global map through his bold investments in key industries. This has helped to transform our economy from heavy import dependence to a net exporter in some critical industries including cement and fertilizer.”
At the inauguration, which had in attendance senior government officials from Nigeria and other African countries, Buhari described the refinery as a game-changer, just as the Founder/Chairman, of Dangote Group, Aliko Dangote, declared that the facility would put an end to the inflow of toxic substandard petroleum products into Nigeria.
The project was inaugurated at the Dangote Industries Free Zone, Ibeju-Lekki, Lagos State. It was attended by governors, lawmakers, government functionaries, royal fathers, captains of industries, and prominent Nigerians from all walks of life.
According to the president, Nigeria’s economy, which has been stressed for many years and over a decade of insurgency, has also been severely impacted by several external crises including the global financial crisis, the collapse of oil prices, the Coronavirus pandemic, and the Russia-Ukraine war.
The consequences of these challenges, he said, constituted a severe strain on the economy, limiting the government’s ability to provide basic infrastructure without resorting to huge borrowing.
He said, “Our government, therefore, focused its attention on creating an enabling environment for the private sector to thrive and fill the enormous gap in investments, not only in infrastructure but also in all critical sectors.”
Dangote also stated that the refinery would start delivering refined products to the Nigerian market from July this year, as operators urged the Federal Government to ensure transparency in the supply of crude oil to the 650,000 barrels per day crude oil processing refinery.
Speaking at the event, the founder of the refinery, Dangote, said, “It is our firm commitment that we will replicate in this sector what we have actually achieved in the cement and fertilizer markets, while Nigeria transformed from being the largest importer of these crude products to a net exporter.”
He pointed out that the “first goal is to ramp up projections of various products to ensure that within this year, we are able to fully satisfy our nation’s demand for higher quality products to enable us to eliminate the tragedy of import dependency and stop, once and for all, the dumping in our market of toxic substandard petroleum products.
“Our first products will be in the market before the end of July, beginning of August this year.”
He also said the refinery plans to export to 53 African countries which depend on other countries for petroleum products.
Meanwhile, Emefiele said the Dangote Refinery and Petrochemicals could spare Nigeria about N5tn to N7tn annually in the fiscal expenditures of the federal government over the next five years.
He noted that the project would support the fiscal operations of the government, easing budget constraints of funding fuel subsidies.
The CBN governor added that the cost of fuel subsidy may hit N4.4tn by the end of 2022.
He said, “This project will equally provide support to the fiscal operations of the government as it could help ease budget constraints of funding the petroleum subsidy and engender fiscal savings. Available data indicate that, over a five-year period, fuel subsidy in Nigeria rose more than nine-fold from about N154bn in 2017 to over N1.43tn before another three-fold rise to N4.4tn by the end of 2022.
“A simple straight-line projection suggests that this figure could surpass N7tn within the next three years if we do not tackle it effectively. Thankfully, the Dangote Refinery and Petrochemicals could spare Nigeria about N5tn to N7tn annually in the fiscal expenditure of the federal government over the next five years.”
Emefiele also expressed optimism that Nigeria, under the incoming administration, would cease importing petroleum products, fertilizer, and petrochemicals and save the country over $26bn.
He said, “Nigeria will cease importing petroleum products, fertilizer, and petrochemical that drained over $26bn in 2022. The self-sufficiency in refined petroleum, urea, and polypropylene, which Nigeria has attained with this project is a strong testament to how leadership, dedication, focus, commitment, and resilience have helped Nigeria on its drive towards import substitution and export orientation.”
The CBN governor also noted that the take-off of the Dangote Refinery and Petrochemical factories came with some economic benefits to Nigeria, such as generating thousands of direct jobs and millions of indirect jobs, with over 135,000 permanent jobs.
He added that nearly 4,000 Nigerian personnel are on site, excluding employment by the various contractors and subcontractors at the project site.
The apex bank boss also said that the project would generate up to 12,000WM of electricity, saying, “I am also proud to state that the project will generate up to 12,000MW of electricity. In addition, the refinery and the other ancillary projects will have significant multiplier effects on other sectors of the economy by supporting a diverse range of sectoral value-chains.”
Emefiele further said that the project could save the country in terms of foreign exchange and fiscal burden.
He said, “According to the balance of payments statistics, the cost (including freight) of petroleum products imports into Nigeria doubled over a five-year period from about $8.4bn in 2017 to $16.2bn (indicating an annual average of $11.1bn), before rising further to $23.3bn by end-2022. At this rate, the average annual cost of petroleum products imports to Nigeria could reach $30bn by 2027 if we continued to rely on petroleum imports. These figures suggest that the refinery could engender foreign exchange savings, to the country, of between $25bn and $30bn annually.”
He added that the country could earn about $30bn foreign exchange savings and an extra $10bn, making a total of $40bn foreign exchange savings.
“The impact of these savings will be directly reflected in Nigeria’s foreign exchange reserves by reducing the pressure on our balance of payments. There are also substantial benefits that we will gain from the export of refined products to the rest of the world.
“In addition to the nearly $30bn foreign exchange savings from the reduction in petroleum imports, the economy is projected to benefit an extra $10bn of foreign exchange inflow annually through the export of refined petroleum products, which will further boost our official reserves and enhance exchange rate stability,” the CBN governor added.
‘Dangote repaying loans’
Emefiele also disclosed that the Dangote Group has paid back about 70 percent of the loans it took to construct its mega 650,000 barrels per day refinery in Lagos.
The CBN boss said the refinery was initially estimated to cost just about $9bn but the project cost escalated and was eventually completed with a total of $18.5bn.
The amount, he said, constituted 50 percent equity investment by Dangote and 50 percent debt finance by banks.
Emefiele said the commercial loan component of the project was financed majorly by domestic banks while the rest was provided by foreign banks.
“We have it on good authority that the Dangote Group has paid off some portion of these commercial loans even before this commissioning today,” Emefiele said.
He noted that the debt for the refinery has decreased from $9bn to $2.7bn, which is a 70 percent decrease.
The Group Chief Executive Officer, of Nigerian National Petroleum Company Limited, Mele Kyari, said the coming onstream of the refinery was a defining moment for Nigeria’s energy sector.
He said NNPC would continue to support investments in the downstream sector that sought to eliminate import dependency.
Some African leaders who were present at the event described the project as a game-changer that would benefit all of Africa.
Those present at the historic inauguration of the refinery include the President of Ghana, Nana Akufo-Addo; the President of Niger Republic, Mohammed Bazoum; President of Chad, Mahamat Deby.
Others include the President of Senegal, Macky Sall, and his Togolese counterpart, Faure Gnassingbé.
In his special remarks, the Ghanaian President, Akufo-Addo, said the refinery would not only strengthen the Nigerian economy but that of West Africa and the entire continent by extension.
“I’ve said it before, that when we think of West Africa and Africa before our individual countries, we are not just being Pan-Africans, we are being true nationalists because what makes West Africa and indeed Africa better will make each of our individual countries better and more prosperous.