Wednesday, October 13, 2021 / 11:25 AM / by CSL Research / Header Image Credit: infinix global Based on the recently updated external sect
Wednesday, October 13, 2021 / 11:25
AM / by CSL Research / Header Image Credit: infinix global
Based on the recently updated external sector
statistics of the Central Bank of Nigeria (CBN), FX consumed in the importation
of Crude Oil between January to August 2021 summed up to US$690.19m, lower than
US$930.24m in the corresponding period in 2020. Over time, the sustained lack
of local refining capacity has resulted in the country’s total dependence on
imported refined crude oil resulting in a significant portion of the country’s
scare FX being spent on importation of petroleum products. Recently, Nigeria
seems to have taken the short-term route to strengthen its FX position by
issuing dollar-denominated bonds, exercising special drawing rights, and
improving oil production amid rising prices. Nonetheless, the structural issues
persist.
The Nigerian National Petroleum Corporation is the
major supplier of petroleum products in the country and has been the sole
importer of petrol in recent years as the market realities have forced
petroleum marketers to stop the importation of the product. Over the years,
successive governments have tried to revive the country’s ailing refineries
with no evident results. Besides, protracted years of delay and disagreements
on the oil and gas reform bill have muted investments in improving the entire
value chain of the industry. Currently, the combined capacity utilization of
the existing refineries stands at zero due to the ongoing revamping of the
state-owned refineries according to available data from the Nigerian National
Petroleum Corporation (NNPC).
Dangote’s
integrated refinery has enormous economic potentials given its capacity to meet
local demand and serve the needs of neighbouring countries. At a time when the
Federal Government is exploring possible options to alleviate the pressure on
foreign exchange reserves, the project will enable the government to conserve
the much-needed foreign exchange expended on the importation of petroleum
products.
The CBN
governor earlier this year noted that the facility will sell the refined crude
to the Federal Government in Naira. The Group Managing Director (GMD) of
Nigerian National Petroleum Corporation (NNPC), Mele Kyari earlier this year
put Nigeria’s daily consumption of refined crude oil at 377,358bpd, implying
that Dangote Refinery alone with its 650,000bpd capacity can more than meet
local demand., and earn FX for the country through exports. The government has
also been promoting the establishment of modular refineries.
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