Yemisi Izuora
The massive Dangote refinery now the pride of Africa, is a key asset that has changed Nigeria’s status as petroleum products import oriented country to key exporting country.
The journey indeed began in September 2013, when Alhaji Aliko Dangote announced his plans for the refinery.
It was then estimated to cost about US$9 billion, of which US$3 billion was projected as equity investment by the Dangote Group and the balance financed through commercial loans.
Oriental News Nigeria reports that however, due to an array of factors, the project was eventually completed with a total of US$18.5 billion with funding distributed into 50 per cent equity investment and 50 per cent debt finance.
The commercial loan component of the project was financed majorly by domestic banks with the balance sourced from foreign banks.
The Central Bank of Nigeria, CBN, also partnered, as always, with the Dangote Group in ensuring the successful completion of the project by providing about N125 billion, to cover domestic currency requirements for the venture.
Interestingly, the CBN, Governor, Godwin Emefiele, while addressing audience including foreign heads of state mostly from the Continent of Africa, diplomats and captains of industries, disclosed that the Dangote Group has started repaying some of the commercial loans even before the commissioning of this facility.
This reflects the commercial capability of the Group and its Chairman.
Emefiel, informed the gathering that, following extensive repayments, outstanding debt has dropped appreciably from over US$9 billion to US$3 billion.
He also appreciated all the participating local Nigerian banks, who did not only partner with the project through effective financing but were keenly aware of the importance of the project for our nation. They provided immense support and exceptional understanding, even when interest payments and principal repayment had fallen due.
The Governor said the refinery and petrochemical project by the Dangote Group is a testament to Aliko Dangote’s vision for Nigeria.
“It shows that, regardless of what the world thinks, Nigeria can be self-sufficient in all products that we consume and at the same time export our excess output to the rest of the world”. Emefiele added.
He also recalled the events leading to Nigeria’s eviction from the JP Morgan index in 2015 following their pessimism on Nigeria’s outlook and our ability to take charge of our fortune. “We explained the ongoing efforts to diversify our economic base, through import substation and export promotion strategies, to sustainably attain self-sufficiency. They were skeptical, saying that Nigeria typically crafts brilliant policies that could engender diversification but lacked the ability to fully implement them. Even when we insisted that, under the leadership of President Muhammadu Buhari, that the ongoing efforts will be effectively implemented to diversify the economy and make us globally competitive; they still doubted us.”
Emefiele continued, Aside enumerating our strategic efforts in the agriculture and other critical sectors, a sterling projects that we highlighted was the gigantic Dangote Refinery and Petrochemical project. Your Excellencies, they doubted our willpower to succeed with this project. In hindsight, I could appreciate their skepticism because they do not understand how a single individual could build a refinery capable of serving an entire nation. To them, projects of this magnitude are usually only undertaken by sovereigns not individuals. But like Nelson Mandela once famously said, “it always seems impossible until it is done.”
Today, “it is with extreme delight that I say that this Mandela’s quote has come true for us. The impossible has today become possible. I am glad that we never doubted. Under President Muhammadu Buhari’s leadership this seemingly unattainable project has berthed and, correspondingly, under the incoming administration of President Bola Ahmed Tinubu, Nigeria will cease importing petroleum products, fertiliser and petrochemical that drained over US$26 billion in 2022”.
The Governor stated that 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.
He said that the take-off of the Dangote Refinery and Petrochemical factories comes with numerous economic benefits to Nigeria.
First it will have enormous impact on job creation by generating thousands of direct jobs and millions of indirect jobs, with over 135,000 permanent jobs. So far, there are nearly 4,000 Nigerian personnel on site, excluding employment by the various contractors and subcontractors at the project site.
In addition the project will generate up to 12,000MW of electricity, while 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.
The Lagos Chamber of Commerce and Industry, LCCI, had earlier noted that the project could spur “further growth and development across its value-chain, including cosmetics, plastics, and textiles, while strengthening value addition in agribusiness, including the Sugar Backward Integration projects that plan to create a strong localised supply in the sugar industry, benefiting local suppliers across the sugar value-chain.”
More importantly, the project avails Nigeria with significant savings both in terms of foreign exchange and in easing the fiscal burden on Federal Government.
Available data at the Central Bank of Nigeria as of 2014, shows that at least 30 per cent of the foreign exchange required to meet Nigeria’s import needs went into the importation of refined petroleum products.
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 US$8.4 billion in 2017 to US$16.2 billion (indicating an annual average of US$11.1 billion), before rising further to US$23.3 billion by end-2022.
“At this rate, the average annual cost of petroleum products imports to Nigeria could reach US$30 billion 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 US$25 billion and US$30 billion annually.” says Emefiele.
The impact of this 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 the world.
In addition to the nearly US$30 billion foreign exchange savings from the reduction in petroleum imports, the economy is projected to benefit an extra US$10 billion of foreign exchange inflow annually through the export of refined petroleum products, which will further boost our official reserves and enhance exchange rate stability.
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-folds from about N154 billion in 2017 to over N1.43 trillion before another three-fold rise to N4.4 trillion by the end of 2022.
A simple straight-line projection suggests that this figure could surpass N7 trillion within the next three years if we do not tackle it effectively. Thankfully, the Dangote Refinery and Petrochemicals could spare Nigeria about N5 to N7 trillion annually in fiscal expenditure of the federal government over the next five years.
Your Excellencies, distinguished ladies, and gentlemen.
The Dangote Refinery and Petrochemical Factory which is being inaugurated today is a blessing to Nigeria and Africa as a whole. Favourable spillovers from this project are also expected to spread from Nigeria to other West African countries and eventually to all countries of the African continent.
The recent endeavours of Alhaji Aliko Dangote confirm that Africans have the capacity to drive the continent’s economic integration, growth, and development, rather than depend almost entirely on foreign investors, the Governor declared.
Also, the Central Bank of Nigeria, through its various development finance interventions, has continued to support critical sectors of the Nigerian economy to promote a homegrown rebalancing of our economy and foster self-sufficiency. Accordingly, since the refinery will backstop the diversification efforts by exporting its surplus refined products, the CBN supported the project through our Small and Medium Enterprise Refinancing and Restructuring Facility (SMERRF).
Under this facility, the sum of N75.0 billion was released for the project through a consortium of banks, in order to bolster value-addition in the real sector, create jobs sustainably, and enhance foreign exchange dynamics.
The intervention in this project is one of the many efforts of the CBN to support President Muhammadu Buhari’s drive to diversify the economy.
The Bank has provided interventions in many critical segments of the real sector.
For instance, the CBN Real Sector Facility, is implemented through two interventions, namely Real Sector Support Facility through Differentiated Cash Reserve Requirement (RSSF-DCRR) and Covid-19 Intervention for Manufacturing Sector. Under this facility, the CBN has released the sum of N2.56 trillion to 462 projects in agriculture, manufacturing, mining, and services sectors.
In addition, the CBN has also supported other priority sectors and segments of the economy, with cumulative N3.60 trillion released to the manufacturing sector to support the domestic productive capacity of industries.
The sum of N2.09 trillion has been disbursed to various projects in the agricultural sector, particularly through the Anchor Borrowers’ Programme, which has supported 4.56 million smallholder farmers cultivating over 5.96 million hectares of agricultural commodities across the country. The Bank has also supported infrastructural development with the sum of N2.28 trillion to bridge the nation’s infrastructure gap and improve access to energy for domestic production.
Emefiele, however attributed those achievements to a strong leadership provided by President Muhammadu Buhari, through his unrivalled leadership and drive to ensure that Nigeria, and indeed the entire Africa, produce what we consume and consume what we produce.
This has provided a beacon and an inspiration for us to double-up our efforts in ensuring self-sufficiency across all sectors of the economy including agriculture, manufacturing, education, health, power, infrastructure, oil, maritime, etc.
Emefiele also said that the is only the beginning of the returns expected from the robust foundation which Buhari has laid to rebalance the Nigerian economy.
“I am convinced that within the medium-term Nigeria will be able to reverse its education and health tourism outflows, attain self-sufficiency in food and agriculture products, and realise a globally competitive manufacturing sector.” he summarized.
Oriental News Nigeria, reports that the refinery complex, includes a refinery, petrochemical plant, a urea fertiliser plant, and a subsea pipeline project. The petrochemical facility has a capacity to produce one million metric tonnes of polypropylene per annum while the urea fertiliser plant will be able to produce three million metric tonnes of urea annually.
The Dangote refinery which has the capacity to process 650,000 barrels of crude oil per day, is the largest single-train refinery in the world. Given this processing capacity, the refinery is more than able to meet all of Nigeria’s domestic fuel consumption, which is about 450,000 barrels per day; whilst the excess production will be available for export.
This will not only aid Nigeria’s domestic petrol needs, but also help in generating export revenues for our country.
The refinery is designed to process not only the Bonny Light grade of crude oil, but also process a wide variety of other crude streams including many from Africa, some Middle Eastern streams, and the US Light Tight oil.
More importantly, the Dangote refinery is equally capable of delivering all types of liquid products including gasoline, diesel, kerosene, and aviation jet fuel.
