The Federal Government may cut its approximately N6.2tn yearly fuel import bill if the Dangote Petroleum Refinery begins the sale of premium motor spirit as promised by the Chairman of the Dangote Group, Aliko Dangote.
Dangote, while speaking at the Africa CEO Forum Annual Summit in Kigali, Rwanda on Friday, assured Nigerians that following the laid-down plans of the Dangote refinery, Nigeria would no longer need to import petrol starting next month.
The country’s petrol import was reduced to an average of one billion litres monthly after President Bola Tinubu removed fuel subsidy on May 29 last year, according to a report by the National Bureau of Statistics.
According to Dangote, the $20bn refinery can meet West Africa’s petrol and diesel needs, as well as the continent’s aviation fuel demand.
He said, “Right now, Nigeria has no cause to import anything apart from gasoline and by sometime in June, within the next four or five weeks, Nigeria shouldn’t import anything like gasoline; not one drop of a litre.
“We have enough gasoline to give to at least the entire West Africa, diesel to give to West Africa and Central Africa. We have enough aviation fuel to give to the entire continent and also export some to Brazil and Mexico.
“We have started producing jet fuel, we are producing diesel, and by next month, we’ll be producing gasoline. What that will do is it will be able to take most African crudes.”
The assurance by Dangote, if realised, would reduce the country’s approximately N6.2tn annual spending on PMS import.
With an average pump price of N670/litre, marketers put the average landing cost of petrol currently at N520/litre, considering the price of the Nigerian National Petroleum Company Limited, which is the only importer of the product.
Operators also put the average difference between the landing cost and pump price of PMS at N150/litre.
With an average monthly consumption of 1 billion litres, Nigeria currently spends approximately N520bn on the importation of PMS every month. This is N6.2tn annually.
Going by the planned June supply of PMS by Dangote, the country is expected to save a substantial amount from the elimination of shipping and other charges attached to importation, according to operators and industry experts.
The difference between the landing cost and the pump price of petrol is N150 per litre, according to operators.
Landing cost is the total cost of delivering the shipment to Nigeria from a foreign country, including all expenses incurred from the point of production to the point of delivery.
Refined petroleum products often arrive in the country via the Atlas Cove, from where it is transferred to jetties via daughter vessels. From jetties, the fuel is moved to various tanks.
Marketers say this difference of N150 between the landing cost and the pump price has to do with the cost of moving PMS from the port to various filling stations across the country. This also includes marine costs, and the Nigerian Ports Authority charges, among others.
The PMS landing cost is different from that of diesel, aviation fuel, and other petroleum products.
In foreign currency, the country spends an average of $4.16bn annually if converted the N6.2tn at the rate of N1,520 per dollar. However, there are arguments that the NNPCL spends more than this on PMS importation.
The actualisation of Dangote’s promise is expected to strengthen the naira.
According to industry reports, Nigeria spends at least $10bn annually on the import of PMS, aviation fuel, diesel and other petroleum products.
Analysts believe that not less than one-third of the country’s annual foreign exchange expenditure goes into fuel imports.
Importation stoppage
A reliable source at the Central Bank of Nigeria said that the anticipated commencement of fuel supply by the Dangote refinery in June would herald a positive shift in the nation’s economy.
According to the source, the move to halt fuel imports will lead to a substantial reduction in the demand for foreign exchange, thereby strengthening Nigeria’s economic position.
The source further noted that, with the demands on forex reducing, the naira would regain strength.”As the dollar demand reduces, the naira will rebound and that is good for the economy,” the CBN source said.
When contacted, the NNPCL spokesperson, Olufemi Soneye, declined comments.
Soneye said the NNPCL is no longer a corporation and could not comment on Dangote refinery’s impact.
The Director of Press and Public Relations, Ministry of Finance, Mr. Mohammed Manga, could not be reached for comments on Sunday as calls and messages sent to him went unanswered.
Also, the Director of Corporate Communications, Central Bank of Nigeria, Hakama Sidi Ali, did not respond to calls to her phone. She had yet to respond to a message sent to her line.
But the Director-General of the Centre for the Promotion of Public Enterprise, Dr Muda Yusuf, said the commencement of refining of petrol by the Dangote refinery would be a game changer for the Nigerian economy, especially from the perspective of the effect on the foreign exchange market and domestic energy cost.
Yusuf noted that, currently about 30 per cent of Nigeria’s import bill is on petroleum products.
“This has been estimated at between $10bn and $15bn annually over the decade. This would amount to a substantial easing of demand pressure on the foreign exchange market,” he stated.
Yusuf added further, “Already we have seen the impact of the domestic refining on diesel and aviation fuel importation. Even the prices have dropped. I therefore expect to see a major impact on the exchange rate.
