The International Monetary Fund (IMF) has said that the refinery by Dangote Industries Limited will increase the nation’s oil and gas sector trade balance by $2bn per year after commencing operations.
The international organization with its headquarters in Washington said although Nigeria has been a long-time exporter of crude oil products, she still imports refined oil to meet its domestics needs, according to IMF the Dangote refinery will be a step in the right direction for the nation accessing refined oil within its own borders, stating that the refinery will make the nation an exporter of refined crude products.
According to a report released by the IMF, Dangote refinery has the potential to transform Nigeria’s petroleum industry, boost growth, turn the country into an exporter of refined products, improve the balance of payments, and transform regional trade patterns in the continent.
The IMF stated that “With a crude oil production of almost two million barrels per day, Nigeria is Africa’s biggest oil producer and one of the largest oil exporters globally. Yet, only a small fraction of Nigeria’s crude oil production is refined domestically —on average only about 0.08 mbpd have been delivered to local refineries between 2008 and 2017, just a fraction of the theoretical refining capacity of 0.445 mbpd (broadly covering domestic demand) including due to under-investment into the refiner,”
It pointed out that, “This leaves a substantial opportunity for value added to meet domestic demand for petrol, kerosene, jet fuel, and diesel, and thus to reduce the import bill while diversifying exports. A new oil refinery constructed by the Dangote Group in Lagos State promises to double Nigeria’s refining capacity and boost activities in the downstream sector.”
The statement stated that once operational, with a maximum refining capacity of 650,000 bpd, the privately-operated Dangote refinery has the potential to meet all domestic demand for liquid products and still have sufficient surplus for exports, drastically reducing the expense incurred by the nation in importing refined oil products.
The IMF noted that this a major development in the nation’s economy as it would translate into reduced imports of refined products by 450,000 bpd and increasing exports of refined products by 200,000 bpd while decreasing net exports of crude oil to refine oil by 650,000 bpd.
According to the IMF “Under the currently envisaged mix of refined products, this would boost the country’s growth by 0.3 to 0.4 percentage points in 2022, and improve the trade balance by $2bn per year (net after reducing both net crude exports and refined oil imports), these benefits could materialise as soon as 2020, the current target year to make the refinery operational, but are included from 2022 onwards in staff estimates, thus providing upside potential to current projections,”.
The organization further stated that “Additional economic benefits could be significant. At the current construction stage, the refinery is directly or indirectly employing over 180,000 people, including on-site contractors. Once operational, additional job opportunities would materialise, through indirect employment through retail outlets, filling stations, and in transport.”
According to the projections by the IMF, Dangote Refinery has the capacity to increase Nigeria’s trade balance with as much as $2 billion on a yearly basis.