Central Bank of Nigeria (CBN) Governor, Godwin Emefiele said Nigeria is looking forward to the completion of Dangote Petroleum Refinery to help ease the pressure on the country’s foreign exchange reserves.
Emefiele, who spoke on the sidelines of the ongoing International Monetary Fund (IMF)/World Bank annual meetings in Washington DC, said Nigeria currently spends almost 40 percent of its scarce forex on the importation of petroleum products as well as petrochemicals.
He expressed optimism that once the Dangote Refinery and Petrochemical Plant commence operations around July next year, the country would be in a position to be able to save 40 percent of the FX it spends on the importation of petroleum products as well as petrochemicals.
“On the Dangote Refinery, by the time it begins production latest July next year, it is going to be a major source to save forex for Nigeria.
“Right now, the overall forex we spend on imported items, the importation of petroleum products consumes close to 30 percent.
“By the time you add diesel, aviation fuel, petrol and the rest of that which makes up the 30 percent, the Dangote Refinery has the capacity to produce 650,000 barrels per day.
“There is a domestic component that is about 455,000 barrels. Even if the 455,000 is what is sold to Dangote in naira alone, it is going to be a major forex savings for Nigeria,” he explained.
This, he also pointed out would put the central bank in a better position to float the naira.
Nigeria is currently experiencing dollar shortage leading to the rationing of the commodity to importers and foreign investors who want to repatriate their earning back to their home country.
The naira has also depreciated to its record low on the Investors and Exporters (I&E) foreign exchange window on Thursday, down 1.68 percent to N422.07 to the dollar in the market.
The naira also traded around N575 -N580 to the dollar on the parallel market even as the country’s forex reserves climbed to $39.42 billion by October 13, from $36.10 billion a month ago.
The CBN governor also disclosed that the total cost of the Dangote Refinery project was about $17.5 billion and the total equity from the Dangote Group in the project was $9 billion.
He said less than $9 billion was contributed by a combination of foreign and local banks and the CBN.
“So, you are looking at a transaction where the leverage is almost one-to-one. We think that is going to be a major FX saver for our country and we would export those refined products.
“If you look at the cost of freight alone, it is a major saving for Nigeria. That is because if we have to go to Europe or other parts of the world to bring in petroleum products where we pay heavily in freight and in stocking those products in the high sea before we offload them, Nigerians would benefit a lot from the Dangote Refinery,” Emefiele said.
Emefiele pointed out that the project was one of Nigeria’s backward integration programmes, saying the country was proud that it was coming to light.
“Indeed, we know that refineries abroad are already scared because they know the market they would lose because Nigeria will prefer to patronise Dangote Refinery instead of foreign refined petroleum products.
“On the petrochemical, it is also expected to commence about same period next year. That petrochemical plant will be producing 900,000 tonnnes of polyethylene and polypropylene granules. Nigeria’s annual consumption here is less than 200,000.
“What does that mean? It is going to save five percent of our imports. If you save five percent of your imports and another 30 percent in petroleum products and then in fertliser where we would save about two percent of our imports, we are moving close to saving 40 percent of the country’s imports.
“By that time, you will see what we would be doing when people talk about floating the naira, and then let’s see how the currency will depreciate,” he added.