The Federal Government may significantly reduce its N6.2 trillion annual fuel import bill with the imminent start of premium motor spirit (PMS) sales by the Dangote Petroleum Refinery. This development was confirmed by Aliko Dangote, Chairman of the Dangote Group, during the Africa CEO Forum Annual Summit in Kigali, Rwanda.
Key Highlights:
- Local Production to Replace Imports: Dangote assured that Nigeria would no longer need to import petrol starting next month, leveraging the refinery's production capacity.
- Capacity and Scope: The $20 billion refinery is expected to meet West Africa’s petrol and diesel needs and the continent’s aviation fuel demand.
- Import Reduction: Nigeria's petrol import has been reduced to an average of one billion litres monthly after the removal of the fuel subsidy by President Bola Tinubu on May 29 last year.
- Financial Impact: With an average pump price of N670/litre and a landing cost of N520/litre, Nigeria spends approximately N520 billion monthly on PMS importation, totaling N6.2 trillion annually.
- Economic Benefits: The Dangote refinery’s local production of PMS will save substantial costs related to shipping and other importation charges.
Industry and Economic Implications:
- Strengthening the Naira: With the reduction in demand for foreign exchange due to decreased fuel imports, the naira is expected to regain strength.
- Reduction in Foreign Exchange Expenditure: Analysts estimate that not less than one-third of Nigeria’s annual foreign exchange expenditure goes into fuel imports, which currently amounts to about $10 billion annually.
- Economic Optimism: Industry experts like Dr. Muda Yusuf, Director-General of the Centre for the Promotion of Public Enterprise, view the commencement of local refining as a potential game-changer for the Nigerian economy, particularly in terms of easing demand pressure on the foreign exchange market.
Operational Developments:
- Fuel Marketers' Response: Independent Petroleum Marketers Association of Nigeria (IPMAN) plans to meet with Dangote for negotiations on possible price cuts through bulk purchases as the refinery begins PMS production.
- Impact on Fuel Prices: In April, Dangote reduced the price of diesel from N1,500 to N1,000 per litre, setting a precedent for potential PMS price adjustments.
Government and Institutional Reactions:
- Central Bank of Nigeria's Position: A source at the Central Bank of Nigeria highlighted that the commencement of fuel supply by the Dangote refinery would lead to a substantial reduction in foreign exchange demand, bolstering the naira’s value.
- Federal Government’s Stance: Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, emphasized the need to stop fuel imports to free up scarce foreign exchange for other sectors of the economy.
