The International Monetary Fund (IMF) has noted that the oil refinery being developed by Dangote Industries Limited will increase Nigeria’s annual trade balance by $2bn.
The IMF lamented that Nigeria, despite being a long-time crude oil exporter, continued to import refined oil to meet domestic demand.
The Funds position was disclosed in a report released on Wednesday that the Dangote refinery could transform the country’s petroleum industry, boost growth, turn the country into an exporter of refined products, improve the balance of payments, and transform regional trade patterns.
According to the IMF, “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 refinery.
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“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 Fund added that with a maximum refining capacity of 650,000 bpd , the privately-operated Dangote refinery could meet all domestic demand for liquid products and still have sufficient surplus for exports.
This means that there would be reduced imports of refined products by 450,000 bpd, and increased exports of refined products by 200,000 bpd. The net exports of crude oil to refine oil would also be down by 650,000 bpd .
It said, “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.
“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,” the IMF report stated.