•Will it finally hold — or is it just the latest of the many failed promises on local refining?
The umpteenth fuel queues and spiking pump prices should goad the government to quit pussyfooting over local crude oil refining, given how critical it is to the strategic health of the Nigerian economy.
For eons now, it’s been no functional local refineries, despite millions of dollars sunk into so-called “turnaround maintenance” (TAM) for the four public refineries that the Nigerian National Petroleum Company Ltd (NNPCL) owns. But in the past one year, a brand new, major refinery — in Dangote Refinery and Petrochemicals — has arrived; and that is apart from one or two small ones.
Yet, it has been the same, annoying shifting of the goal post, over promised target debuts. After a long hiatus, it was July; July turned August; August just turned September!
Will September hold firm? Or become the latest yo-yo in a series of empty pledges? The more this failure continues, the more the local economy is trapped in high costs — avoidable though — which continue to drive inflation. Inflation is this economy’s No. 1 enemy; and local refining holds the key to moderating it, by lowering pump prices.
Still, there appears some glimmer of sunshine in the dark clouds — as the Federal Government just set up a strong panel to implement the policy to sell crude to local refineries, by the way, a smart and wise move.
Institutions in that implementation panel are the Nigerian Midstream and Downstream Petroleum Regulatory Authority (refinery regulators), Nigerian Upstream Petroleum Regulatory Commission (crude oil mining regulators), Central Bank of Nigeria (government bank), and the African Export-Import Bank (link and payment clearing house between the Naira crude oil trading partners).
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Superintending the process is Wale Edun, Minister of Finance and Coordinating Minister of the Economy, while the direct driver appears Zacch Adedeji, executive chairman, Federal Inland Revenue Service (FIRS) and chairman of the Technical Sub-Committee on the crude oil Naira sales.
Which makes this statement from him rather reassuring: “The first PMS (prime motor spirit: petrol) delivery from Dangote is expected next month [September] under existing agreements”.
It really should, given his earlier report card on the committee: “The meeting reviewed progress on key initiatives,” he volunteered, “including the upcoming commencement of Naira payments for crude oil sales to the Dangote Refinery starting October 1, 2024.”
That sure is cheery news — petrol from Dangote in September — if it holds: and you will pardon the virtual yawn that drives inevitable scepticism, given the earlier failed promises. Still, it’s only fair to admit that this appears a strong build-up — stronger than any before — toward the new promise of September.
By the way, Dangote is supposed to be pilot for the Naira crude oil sales to local refineries. But with further progress reports that the NNPC Ltd’s Port Harcourt refinery could finally come on
stream in November, we cannot but project a rather positive outlook — albeit with a huge dose of caution. Once beaten, they say, twice shy.
Still, local refining and its clear economic gains are something to look forward to. You don’t need to be an economy whiz to know it is the best organic move to tamp down high inflation, since lower pump prices should translate into lower shuttle costs — for humans and cargo — which should start driving down inflation.
Again, by Adedeji’s testimonies, it should drastically reduce the US$ 3 to US$ 4 out of every US$ 10 that Nigeria spends on importing refined petroleum products. “Monthly,” he added, “we spend roughly US$ 660 million in this exercise and if you analyse, that will give you US$ 7.2 billion annually. This is a total reduction.”
Massive! The resultant retention of forex should strengthen the Naira’s parity over time, with far less Naira exchanging for these foreign currencies.
Low Naira parity is again a major driver of inflation, especially costly tickets for domestic and international air travels; and costly imported industrial and agricultural machinery — steep costs that hike the prices of goods and services.
But even more enchanting: cheaper petrol from local refineries should start re-setting the post-subsidy costs of doing business. The final gravy, however, is moving from petrol to condensed natural gas (CNG). The cheapest petroleum products are far costlier than CNG. That way, crude locally refined and exported can exclusively earn forex, while CNG too exclusively powers the local economy. That too should strengthen the Naira.
That’s the promise of local refining. That’s why the September debut must hold. If it fails, we have only prolonged — and needlessly too — our days of woe.
