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CBN: Like Dangote, like NNPC refineries

The Central Bank of Nigeria, CBN is supporting private enterprises in the country. It has got programmes that have given fillips to this administration’s special interventions. They are critical investments with some of them venture capital.

The CBN Governor, Godwin Emefiele last week in Lagos reiterated his support for the Dangote refinery, a Nigerian wholly owned private enterprise. The CBN governor had signified intention to support Dangote in his refinery project since the final investment decision, FID was taken by the Dangote group. His first visit to the project site in the Lekki Free Trade Zone in Lagos was on January 11, 2016. Emefiele is thinking Nigeria with Dangote being the prime beneficiary of government support.

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The CBN helmsman visited again last Sunday to inspect the Dangote Refinery. Emefiele believes that the Dangote refinery project that is due to commence operations in April 2020 would make Nigeria save over US$7.5 billion annually through import substitution. The support to indigenous companies by the CBN was to ease the importation of equipment needed in Nigeria for production, says Emefiele.

The 650,000 barrels per day, bpd Dangote refinery would create an unprecedented domestic refining capacity and save the country from capital flight that had been our bane. The Dangote refinery on completion has a 883 KPTA capacity polypropylene plant, three million tons per annum Urea plant and 1,100 kilometres sub-sea pipeline infrastructure to transform the Nigerian economy from a net importer of refined petroleum products to a net-exporter of petroleum products. Over 80 percent of what we consume as fuels is from petroleum which we spend funds importing. Our scarce foreign reserves are depleted because we have failed to expand the frontiers of our economy along vertical linkages that is deeply rooted in petroleum. We have comparative and competitive advantages in petroleum if we refine locally.

It is unbelievable that for over a quarter of a century when we resorted to massive importation of petroleum products and petroleum based raw materials for our industries we enjoyed our comfortableness. Our foreign reserve which some may describe as the nations working capital, has 98 percent of it come from the sale of crude oil. It has provided this working capital for Nigeria since the early 1970s of the oil boom.

With a free fall of crude oil prices in the international market from July 2014, Nigerians commenced the payment of exorbitant rates for imported petroleum products on May 11, 2016. Petrol was increased from N86 to N145 a litre with a difference for the increase at 68.60 percent. Household kerosene, HHK which was N50 rose to over N300 per litre with diesel now selling for over N200 per litre.

The CBN in June 2016, floated the currency with the flexible exchange rate between N300 and N350, an adjustment difference for the increase drifting between 52.28 and 77.66 percent respectively. The policy gave a perceived boon to state coffers for the 2016 budget implementation, but the vulnerable Nigerian groan under high pump price of imported petroleum products in a free falling devalued Naira.

One may not be a fan of the CBN governor but he has over the years, demonstrated capacity after wobbles in the early part of President Buhari’s administration. Many have asked in whose interest government funding of Dangote will be. In one’s part of the country, it is said that everything in a pot of soup is for the eating, so it is for Nigerians to benefit from.

The CBN governor is convinced that one third of Nigeria’s total foreign exchange obligation expended to import petroleum products annually could be better deployed to other critical areas of our economy. CBN will provide funding in terms of foreign exchange and naira to import equipment.

The Dangote Group’s US$9 billion investment is a reality of an indigenous company’s commitment that is interested in the socio-economic growth of Nigeria. “This has made us to support Dangote Group with N75 billion in Forex to import equipment and other facilities to ease completion of the refinery,” Emefiele said.

But should the CBN also look in the direction of the NNPC. That corporation had looked in all directions of financial capitals for financiers of its four moribund refineries in Port Harcourt, Warri and Kaduna with a combined capacity of 445,000 bpd. Was it an oversight on the part of NNPC ignoring the CBN for funds? Nigeria needs the NNPC refineries to increase her refining capacity. The foreign reserves content of our revenue greatly comes from crude oil.

The NNPC, over the years became the goose that lays the golden egg. There are mixed reactions about perceived corruption in the NNPC. But killing the goose that laid the golden egg may not completely serve the purpose. Like Dangote like NNPC! The NNPC has shopped for a little more than US$1 billion to rehabilitate its four refineries to nameplate capacities in global financial capitals without success. Can CBN demand for NNPC business plans to enable it compete with Dangote that would soon become an oligopoly.