Path to Sustainable Growth


Nigeria will benefit immensely from the Dangote Refinery and fertiliser plants, when completed as it will contribute to a significant reduction in the country’s import bill, writes Obinna Chima

With crude oil production capacity of about 2.5 million barrels per day, Nigeria unfortunately imports about 92 per cent of petrol consumed in the country daily.
The country is one of the largest consumers of petroleum products in Africa, and accounts for over seven per cent of Africa’s total refined products consumption, importing over one million tonnes of petrol monthly.

With importation, the four refineries in the country have been left in near comatose state, with jobs being created for other countries.
Nigeria ranks as Africa’s largest producer of oil and the sixth largest oil producing country in the world.

However, regardless of its abundant resources, the country continues to face a myriad of problems as the country has continued to find it difficult to convert its unique advantages into economic and social benefits for majority of its citizens because of its complete dependents on imports.

In fact, the country has been described as a prime example of resource curse, a situation where wealth from natural resources leads to poor economic growth and development and an increased likelihood of civil and ethnic tension.

However, it is expected that the $9 billion Dangote Refinery and the fertiliser plants, which are under construction at the Lekki Free Trade Zone, if completed would have a far -reaching positive effects on the lives of Nigerians and help in transforming the economy. It is also expected to facilitate Nigeria’s age-long quest for economic diversification.

The refinery project, if completed, would be the largest single petroleum refinery in the world with capacity to process 650,000 barrels per day of crude oil. It is expected to help the country conserve the foreign exchange spent on the importation of petroleum products, thereby strengthening Nigeria’s external reserves lead to a significant reduction in the country’s import bill.
In addition, in terms of employment opportunities, 100,000 indirect employments through retail outlets are expected to be created and it would also enhance availability of petroleum products in the country.

Central Bank’s Intervention
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, described the plants as transformational projects for Nigeria.
Emefiele, said this at the weekend during a facility tour of the project site in Epe, Lagos.
He was accompanied by the Deputy Governor, Financial System Stability, CBN, Mrs. Aisha Ahmad; President of the Dangote Group, Alhaji Aliko Dangote; top officials of the company, as well as project engineers.

The CBN governor noted that the fertilizer plant, which has been completed and due for inauguration in April, is twice the size of Eleme Petrochemical.
He also said when the refinery takes off in the first quarter of 2020, Nigeria would not only be self-sufficient in the production of refined petroleum products, but would join the league of countries that export petroleum products to other countries.

Emefiele said, “You all will attest to the fact that this is certainly a transformational project for Nigeria, and it totally keyed into the objectives of President Muhammadu Buhari that says that we need to think about how to conserve foreign exchange and diversify the economy.

“And to put it in proper perspective, by the time you dimension the size of foreign exchange that we use in importing petroleum products into the country today, it is at least the one third of the foreign exchange that the Central Bank spends to import items into Nigeria today.

“By the time we also add the 42 items that we have, which of course, certainly we are going to increase maybe to 50, in due course because we are going to be more aggressive in ensuring that food items that are being imported into this country, that more and more of them are added into the FX Restriction list.

“I’m saying by the time we add the savings from the production and export of petroleum products, by the time we also add the foreign exchange that we spend on food items, close to almost 55 to 60 per cent of what Central Bank or what the government spends in funding, the foreign exchange operations would have been saved in the country.

Furthermore, Emefiele said: “I am truly looking forward that I will be alive the time this comes to fruition. We need to thank the President of Dangote Industries, for this gigantic project. I’m sure that if he knew the scope of the project that he was going into at the time he conceived of it, with the kind of stress he goes through today in trying to actualise this project, he probably would not have gone into it.

“But I want to thank him, I want to congratulate him, thank him for persevering this stress. About 18 months ago when I came here, I said that we would support anybody, any Nigerian company that takes priority for manufacturing items, for agriculture items along the entire value chain.”

Emefiele restated the support of the CBN to any local company that is interested in diversifying the Nigerian economy and joining government in making sure that they equally partner with the government in restructuring the base of the Nigerian economy.
This support, he explained could come both in form of funding and in providing the foreign exchange required for the importation of manufacturing items needed for the project.

While noting that the country stands to gain from the venture, Emefiele stressed that the projects would create millions of jobs for Nigerians. He however, disclosed that the CBN contributed almost about N75 billion to support the refinery project, and that the project was also being supported by foreign banks.

He added, “You will imagine, N75 billion is just a drop compared to about $9billion that this project is costing. But we will continue to show support to individuals and companies that display the determination to help government, to support the government and support the Central Bank of Nigeria in restructuring the base of this country.”

The Lagos Chamber of Commerce and Industry (LCCI), had said the investments would not only reduce the perennial congestion in Apapa seaports, but also reduce the address the chaotic traffic situation in the area. President of the LCCI, Mr. Babatunde Paul Ruwase, described the project as massive.

According to him, the impact on the petroleum sector would be spectacular. He expressed excitement over the pace of work at the refinery and fertiliser plants, which he described as a game changer for the oil sector, saying it would help end importation of petroleum products by the country.

“This project is the first of its kind. There is no investor in Nigeria that has developed the courage to come up with such gigantic project. From what we have seen today, we now have a better perception about the project. From what we have seen on ground, it shows that the project is a reality and it is possible for Nigeria to become exporter of petroleum product,” he said.

Bold Step
Dangote who put the cost of building the fertilizer plant at $2 billion, however revealed that apart from the N75 million given to support the refinery project, the CBN under Emefiele also gave his group N50 billion to support the fertilizer project.

Dangote said: “But more importantly is the moral support that we’re actually receiving from you (Emefiele), encouraging us to make sure that we continue with these transformative projects. Most likely people don’t understand what these projects mean; what they mean is that they are transforming the Nigeria’s economy.

“The biggest problem that we have really is that Nigeria imports more than what we produce like any other African country. But by the time we finish the fertilizer plant, I think Nigeria will be the largest fertilizer exporting country in Africa, not even in sub-Saharan Africa.
“We will also be the largest exporter of petrochemicals, maybe head to head with South Africa because of SAWSO, and then we will be the biggest actually in Africa in exporting petroleum products.

“So the change in terms of importing 90 per cent of what we consume and also exporting about one third out of the country. So it’s a major transformation, and also the gas pipeline which we want to do is actually three billion-scope, which is equivalent to NLNG today, and these are all projects that I believe will transform the economy of Nigeria.”

He added that currently, more than 26, 000 people have been employed and that by the time the projects picked up fully, especially with the establishment of filling stations, almost 80,000 people would have been employed in the facilities.

Business Expansion
Dangote also disclosed that he intends to step up exports of cement and other commodities from Nigeria from this year as he focuses on foreign markets to boost sales and generate much-needed hard currency.
He said he expects to have eight million tonnes of cement to start exporting from July and was commissioning a 650,000 barrel per day (bpd) refinery near Lagos – set to be Africa’s biggest – next year. The export drive would expand further from 2020.

“By next year we will start exporting more than two million tonnes of ammonia out of our three million tonnes’ capacity and we will export more than 35 per cent of petroleum products and about 30 million tonnes of cement,” he told Reuters.
He did not identify which foreign markets he was targeting.

Availability of hard currency in Nigeria would not be an issue provided oil prices stayed relatively buoyant.
“If the price of oil stabilises at $60, I don’t think we would have any problem,” said Dangote, who according to Forbes is currently worth $10.5 billion. OPEC member, Nigeria, suffered severe dollar shortages after prices of crude, its top export and main source of foreign exchange, plunged in late 2014, prompting the introduction of capital controls in 2015.

It now has multiple exchange rates against the U.S. currency and has been selling the dollar on the interbank market to boost liquidity after floating the local naira currency for investors.
“We are looking forward and making sure that we supply more forex in the domestic market,” Dangote said.
Nigeria used to spend around $2.5 billion a year to import cement but with increased investment it has become a net exporter. Dangote said his firm, Dangote Cement, could earn about $600 to $700 million annually from cement export.