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The projected impact of Dangote Refinery
By Boniface Chizea
I am sorry I don’t totally agree with my friend Bismarck on his submission on the likely impact of Dangote Refinery on the Nigerian economy upon commencement of operations. In the first place this is the first time I am being told that we export crude to be refined for us abroad. Logically if that is true we will only worry about the cost we pay to the Refinery overseas for their services and the associated logistics costs.
But all complaints we have heard are to the effect that the cost of imported fuel increases as the market price rises and therefore Nigeria is faced with the dilemma whereby on the one hand we benefit as benchmark price rises but lose as subsidy correspondingly increases.
And I have heard the Governor of Central Bank lament on several occasions that we dedicate about 30% of available foreign exchange on fuel importation which explains why he is on record to have said that he will be prepared to float the Naira when we stop importing fuel. Is it now possible that only logistics costs will account for that level of consumption of foreign exchange??
Yes Dangote Refinery is at the export free zone and probably will sell the products in dollars to everyone and probably including Nigeria. So at the very worst we pay him in dollars at the going International market price for PMS but automatically the logistics costs are not involved and therefore it is not logical to argue that there will be no gains.
Let’s not even consider the time costs of money which delays in bringing the product from overseas to Nigeria would entail. Not to talk about the risk of importing poor quality fuel that wrecks untold damage to car engines at considerable pain and expense for car owners as is currently being experienced. And also the leakage which we suffer as a result of the massive sleaze involved with the payment of subsidy and the entire value chain.
But remember that Nigeria is projected to own 20% equity in the Refinery. Why should we not be able to convince Dangote to accept payments in Naira which is the legal tender in Nigeria? Afterall Dangote has domestic costs to meet in Naira; staff costs and related overheads. Why take dollars from us only to face the challenge of conversion. Even if he also pays his staff in dollars, they are supposed to be spending Naira in Nigeria.
Be that as it may it will be criminal to talk of subsidy again with Dangote Refinery operational. The marketers will sell as they buy just as it is the case with diesel today. Also the date of commencement of operations of the Refinery is like a moving target. Now we are told that it will commence operations by the end of the first quarter of 2023! But all the previous projections tell us that it will take off some time this year 2022. My position remains that Dangote Refinery commencing operations in Nigeria will be a veritable game changer even as we have not averted our minds here to what window of opportunity could arise if our product sale to Dangote is not included in our production quota as given by OPEC! Shalom.
Dr. Boniface Chizea, Lagos
