Chukwu says if the Dangote and the Port Harcourt refineries come on stream, they will reduce Nigeria’s export of crude.
To increase the value of naira, financial experts have called for an increase in the production of crude oil in the country.
According to the founder of Cowry Asset Management Limited, Johnson Chukwu, Dangote Refinery will reduce pressure on the foreign exchange but would only be felt if there’s an increase in crude production.
He said if the Dangote, and the Port Harcourt refineries come on stream, they will reduce Nigeria’s export of crude.
Chukwu said, “In the first place, bear in mind that the country’s foreign exchange earnings are from crude and importation of fuel account for 30% of our total import, so if the refineries come on stream, it will reduce our export of crude and unless we have an increase in crude production any allocation to the local refinery will reduce the amount we made from crude sales.
“So, we have to increase crude production because whatever is going to local refineries will be from the increment and not from the existing 1.3 or 1.4 barrels we produce daily because if we don’t do that it simply means what we save from fuel import would be lost to export earnings from crude.”
“However, whatever crude allocated to Dangote and Port Harcourt should be from incremental crude production so that we can maintain our current export earnings and reduce the 30 percent spent on import.”
Another analyst, Kingsley Chinda, said the 650,000 barrel-per-day Dangote refinery is expected to meet 100% of Nigeria’s demand for refined petroleum products and generate foreign exchange earnings for Nigeria by exporting 40% of its products.
According to Chinda, by producing enough petrol, diesel, jet fuel, and kerosene for domestic consumption, the refinery will reduce the need for Nigeria to import products from abroad.
This, he explained, will lower the demand for dollars and ease the pressure on the naira exchange rate.
He said, “Nigeria’s significant expenditure on fuel imports puts pressure on the demand for foreign currency, particularly the dollar. Reducing or eliminating the need for fuel imports through the Dangote Refinery’s production would reduce the demand for dollars in the importation of fuel. This decreased demand for foreign currency can help strengthen the naira against the dollar.”
“The establishment of the Dangote Refinery will not only contribute to reducing imported inflation and associated costs but also has the potential to attract foreign investments, further bolstering exchange rate stability.”
“The presence of a significant refinery indicates Nigeria’s commitment to developing its domestic refining capacity, which can instil confidence in international investors. The refinery’s scale and strategic importance in the oil and gas sector can make Nigeria an attractive investment destination.
He said that the increased foreign direct investment brings in foreign currency inflows can strengthen the country’s foreign exchange reserves and positively impact the exchange rate.
