The news filtered out this week that the much anticipated Dangote Refinery, had started delivery of petroleum products to customers in Nigeria.
Bloomberg had reported that the 650,000 barrels per day capacity refinery, had delivered its first batch of diesel and aviation fuel on Tuesday ,with a confirmation from the Executive Director of Dangote Industries, Edwin Devakumar.
There has also been a confirmation that marketers would take delivery of the products and pay in Naira, the Nigerian currency.
The Naira has faced strong headwinds since the start of the administration of President Bola Tinubu, who has made several policy missteps that contributed to the downward spiral in the value of the Naira when measured against international currencies, including the United States Dollar.
On his inauguration day as President, after a bitterly and hotly disputed election in May 2023, Tinubu made a strange pronouncement “subsidy is gone”. This was in reference to the subsidy placed on imported petrol which was sold in Nigeria.
The big irony is that Nigeria is one of the largest producers of crude oil but with almost zero refining capacity. That means every drop of petrol and other petroleum products used in the country must be imported from abroad, using scarce foreign currency.
This anomaly had gone on for decades after the obvious sabotage of the existing state owned refineries by corrupt officials in the state oil company, Nigerian National Petroleum Corporation(NNPC).
The Naira has suffered serious devaluation due to a variety of factors, but wastage of foreign currency earnings which are in turn used to import petroleum products is one of the most obvious causative factors.
That is the reason the start of production at the Dangote Refinery, one of the world’s largest has been so hugely anticipated.
At full capacity, the refinery can produce 90 million liters of petrol, diesel, aviation fuel and kerosene daily. That means the estimated daily consumption of 53 million liters can easily be surpassed with the excess earmarked for export.
The Naira will certainly experience better times with less demand pull on the side of petroleum products imports and even better, this would be done solely by the private sector. Hopefully, the bitter economic lessons have been learnt.
The current Naira to Dollar change rate is about N1,230, after dropping from a record high of N1,800 a couple of weeks ago. If the strengthening of the Naira continues without policy disruptions, then just maybe, Nigeria and the Naira might be on the verge of a change in its economic fortunes.
