Nigerians expecting a drastic cut in the retail price of petroleum products, particularly premium motor spirit (PMS), popularly called petrol, with the coming onstream of the Dangote Refinery should better have a rethink, as the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, says no such thing will happen.
Out of the over $19 billion said to have been spent on the construction of the 650,000 barrels per day capacity single-train plant, the CBN was said to have accounted for a significant portion of the loans and foreign exchange provided by various financial institutions to help realize the project.
Speaking on Wednesday in Abuja at the end of the 291st Meeting of the Monetary Policy Committee (MPC), Emefiele said apart from support totaling over N125 billion in local currency, the apex bank, through syndicated loans by some Nigerian banks, facilitated credits valued at over N75 billion to the project.
On the benefits expected to be derived from the operation of the refinery reputed to be the world’s largest single-train refinery, the CBN governor said the plant would save the country about $25billion in import bills annually for the supply of petroleum products consumed in the country.
He said Dangote has already expressed commitment to commence the supply of petroleum products latest by the end of July, or early August.
“That is a big game changer for Nigeria because we will no longer be importing petroleum products – petrol, diesel, and others, thus saving the country import bills of close to $25 billion annually.
Answering a reporter’s question on whether the coming of the refinery would translate into the price of petrol coming down, Emefiele was emphatic that it would not.
“It (fuel price) cannot come down, because it will still be supplied at the prevailing international market rate. However, the price at which the product will be dispensed when it comes out from the refinery will be lower than the price it would have been if dollars were spent to import the fuel from abroad. This is because the supply of the fuel is local, with no transportation, storage, freight costs, and all those logistical expenses involved when fuel is being imported,” he explained.
He said Nigerians may be lucky to have a reduction of close to 20 percent from savings as a result of the removal of those costs associated with logistics for refining petroleum products abroad.
Nigeria, the CBN governor pointed out, has reached a point where the people have to appreciate that whether they like it or not, subsidy on the supply of petroleum products must exit the pricing template.
The coming of the Dangote refinery at this time, he said, gives the country the confidence to know that even if the subsidy was removed, there would still be enough fuel available, though subject to the interplay of market forces to moderate the prices to a level that would help the country’s economy.
“So, we are expecting that, no doubt, by the time the refinery produces for domestic consumption, the excess volume would be exported, to fetch the country conservatively between $5 billion to $10 billion in foreign exchange.
“Whether that would come into the country’s foreign reserves is not the point. But, it is a fact that the dollars that will be available will be sold into the market so that customers of banks who need to import do not necessarily have to come to the CBN for dollars. Dangote will sell to their banks those dollars and we are going to ensure that they are done at good market rate, because the central bank, the country, the government helped Dangote set up that refinery,” he said.
On the performance of RT200 policy aimed at helping the country raise over $200 billion in foreign exchange earnings from non-oil proceeds over the next 3-5 years, Emefiele lamented that the oil sector has failed to add much to the accretion to the country’s foreign reserve in more than two years.
With the country’s oil production declining to less than a million barrels a day last year, the current production figure of about 1.1million barrels per day remains at a dangerously low level for export, given Nigeria’s quota by the Organisation of Petroleum Exporting Countries (OPEC) of about 1.8 million barrels per day.
He said the time has come for all to take he difficult decision to stop the output shortfalls, by joining hands with the NNPC to look at the causes of the decline and the need to ramp up production effectively to 1.8million barrels a day minimum, or 2.0 or 2.3 million barrels per day, plus condensate.
“If we do not do this, I think we are looking at a really big problem ahead of us, particularly at a time when there is a concerted determination to exit fuel subsidy regime. There is danger ahead. We must do something immediately about it,” Emefiele warned.