The Federal Government is poised to significantly reduce its N6.2 trillion annual fuel import expenditure as the Dangote Petroleum Refinery prepares to begin local sales of premium motor spirit (PMS) starting in June. This development follows assurances by Aliko Dangote, Chairman of the Dangote Group, at the Africa CEO Forum Annual Summit in Kigali, Rwanda.
During his speech, Dangote emphasized that the refinery’s launch would eliminate the need for Nigeria to import petrol. “By sometime in June, within the next four or five weeks, Nigeria shouldn’t import anything like gasoline; not one drop of a litre,” Dangote stated.
The refinery, with a $20 billion investment, is expected to cater not only to Nigeria’s needs but also to the fuel demands of West Africa and beyond. Dangote highlighted the refinery’s capacity to produce sufficient gasoline, diesel, and aviation fuel for the entire continent, with surplus for export to countries like Brazil and Mexico.
The recent removal of the fuel subsidy by President Bola Tinubu on May 29 last year has already reduced Nigeria’s petrol imports to an average of one billion litres monthly. According to the National Bureau of Statistics, this reduction has had significant financial implications, with the country spending approximately N520 billion monthly on PMS imports.
With an average pump price of N670 per litre and a landing cost of N520 per litre, Nigeria’s annual fuel import bill amounts to N6.2 trillion. However, with the Dangote refinery’s commencement of operations, substantial savings are expected from the elimination of shipping and other import-related charges.
Industry experts and operators have expressed optimism about the refinery’s impact. They note that the difference between the landing cost and pump price, primarily due to logistics and port charges, will no longer be a burden once local production ramps up.
The Central Bank of Nigeria anticipates a positive economic shift with the refinery’s operations. A reliable source at the bank indicated that the reduced demand for foreign exchange for fuel imports would strengthen the naira. “As the dollar demand reduces, the naira will rebound, and that is good for the economy,” the source remarked.
Despite repeated attempts, officials from the Nigerian National Petroleum Company Limited (NNPCL), the Ministry of Finance, and the Central Bank of Nigeria were unavailable for comments. However, Dr. Muda Yusuf, Director-General of the Centre for the Promotion of Public Enterprise, hailed the refinery as a game changer for the economy. He pointed out that petroleum products account for about 30% of Nigeria’s import bill, estimating the country’s annual expenditure on these imports at $10 billion to $15 billion.
Yusuf further noted the positive impact on diesel and aviation fuel prices due to domestic refining and expected similar effects on the exchange rate and overall economy. However, he cautioned that the refinery’s reliance on locally sourced crude would be crucial for realizing these benefits fully.
In a recent energy conference, Minister of State for Petroleum Resources (Oil) Heineken Lokpobiri underscored the necessity of ending fuel imports to free up foreign exchange for other sectors. “Nigeria does not need to import fuel. We should free our scarce forex for other sectors of the economy,” Lokpobiri asserted, expressing optimism that domestic refineries would address the nation’s fuel import challenges.
As the Dangote refinery gears up to commence operations, the outlook for Nigeria’s economy appears promising, with potential reductions in fuel import costs and strengthened foreign exchange reserves.
