The $20 billion Dangote refinery has been tapped to be the game changer for the cash-strapped Nigerian government and its pressured economy.
The 650,000 barrels per day single-train facility in Lagos is expected to end Africa’s top oil producer nearly three decades of refined oil imports with its surplus exported to neighboring countries or those in need of it.
According to a recent report by Analysts Data Services and Resources (ADSR) Limited, titled ‘Impact of Dangote refinery on the Nigerian Economy’, the giant refinery, owned by Africa’s richest man Aliko Dangote, is projected to grow Nigeria’s GDP to over $400 billion by 2030.
Here are the six economic impacts of the multi-billion dollar refinery:
Push Nigeria’s GDP from 4.15% to 6.21% by 2030
Nigeria’s GDP is not growing enough to meet its population size estimated at 227 million but with the Dangote refinery, real GDP growth is projected to rise from 4.15 percent in 2024 to 6.21 percent in 2030.
The report stated that without Dangote refinery, the country’s GDP growth will be expected to be 3.34 percent in 2024 and may likely rise mildly to 4.13 percent in the next six years.
Ease the pressure on the ailing naira and increase badly needed dollar supply
Africa’s most populous nation is in dire need of dollar liquidity that has put its economy under much pressure and frequent decline on its naira.
Dangote refinery is poised to reduce the demand for FX by 40 percent. With the elimination of such foreign exchange demands by oil marketers, it will ease pressure on the naira, helping it stabilize and potentially strengthen the currency.
“However, it will make the refinery the most significant user/demand of the country’s forex,” the Ibadan-based research firm noted.
Create thousands of employment opportunities
The Dangote refinery is expected to absorb at least 100,000 Nigerians into direct or indirect jobs upon full operations, reducing the rising rate of unemployment and potentially ending poverty that has enmeshed no fewer than 104 million people in the country.
“This can have significant positive impacts on the economy, including stimulating economic growth, increasing tax revenues, improving fiscal stability, and reducing inflation,” ADSR said in its report.
Attract potential investors in the oil & gas sector
The success of the petrochemical facility is expected to draw in investors into the oil and gas industry, improving the country’s scanty foreign direct investment.
This improved investments in the upstream, midstream and downstream sub-sectors will facilitate growth and ensure development.
End Nigeria’s decade-long fuel import-dependence
Nigeria, for the past 28 years, has solely relied on imported refined petroleum to meet its domestic needs despite being Africa’s biggest oil producer.
But with the Dangote Refinery producing PMS locally, the need for importation decreases and potentially meet the needs of other countries in the form of exports.
This reduces the demand for foreign currency used to pay for imports, potentially easing pressure on Nigeria’s foreign exchange
reserves.
“The reduced need for foreign currency to import refined products could lead to a strengthening of the Naira, as fewer dollars will be required for
these transactions.
“This, in turn, could improve the overall balance of payments,” the report stated.
Improved fiscal sustainability
ADSR stated that Dangote refinery’s tax payment will increase Nigerian government revenues that are falling, thereby enhancing the country’s fiscal sustainability.
According to the report, the operation of the facility “may push the government to start working on its own refineries”, leading to competition and stimulating economic growth.
While the refinery is dubbed to ensure effective subsidy management, money used for subsidies can therefore increase spending for public investment in terms of infrastructure.
“Savings from fuel subsidies can be reallocated to other sectors (e.g., health, education, infrastructure) as expenditure.
“Improved revenue is expected to generally lead to less borrowing and improved fiscal sustainability,” the report stated.
By Wasiu Alli @Businessday
