Dangote Refinery and the Economic Implications for Nigeria

T The operations of Dangote Refinery could not have come at a better time. In the past several days, the scarcity and hike in price of fuel have been an issue for Nigerians.





Even the NNPC has had to disclose its challenges regarding the supply and sale of petroleum. However, the presentation of samples of the petroleum from Dangote Refinery Limited by its President, Mr Aliko Dangote, has been seen as a silver lining by many Nigerians.





The Dangote Refinery is symbolic of hope for many Nigerians because it has several economic implications. The first and immediate one is the clarity that it will foster for the supply and sale of petroleum in the country. While it is not without a doubt that there are outstanding issues to resolve, the longstanding importation of petroleum and the decimating condition of the preexisting local refineries have always given the issue an air of mystery. With data on production and sale generated locally, the relevant stakeholders should be able to address issues at a vantage position.





Another economic implication of a working Dangote Refinery is a relief on Naira-USD exchange. Over the years, especially in the last ten years, Naira has frequently nosedived into several losses of value, the major reason being nonlocal production of the country's most sought after commodity: petroleum.





As reported by The Punch Newspaper, at 650 000 barrels per day, the Dangote Refinery is said to have the capacity to meet the demands of Nigeria and even sub-Saharan Africa. This will ultimately lead to a landmark reduction in import duties and the strengthening of Naira.





Should the Refinery meet the demands of Nigeria and sub-Saharan Africa, another economic implication is the repositioning of Naira as a currency of value within Africa. A quick check of exchange rates of Naira on Google with currencies of countries in West Africa and other sub-Saharan regions shows that the Naira reflects poorly on the assumed giant status of Nigeria. In West Africa where Nigeria is, as of today, only Guinea, Guinea-Bissau and Sierra Leone have currencies lower in value than Naira. The West Africa Franc (XOF) is two times more valuable, 1 Ghanaian cedi is worth over a 100 Naira, a Gambian Dalasi is over 20 Naira, to name but a few.





A more valuable Naira in sub-Saharan Africa also holds the possibility of better intra-continental collaborations. Although Nigeria is blessed with both human and natural resources, there are however some countries more endowed with some of the material resources that Nigeria has. For example, livestock production is an economic mainstay of Niger Republic, and perhaps more abundant there than in Nigeria. With a turnaround occasioned by Dangote Refinery, Nigeria is in pole position to positively explore opportunities within its neighborhood and further lessen overseas pressure on its economy.





Furthermore, a Naira without the bane of frequent devaluation and a good worth within Africa provides more ample opportunities for increase in per capita income for Nigerians. In relative understanding, the other sectors of the Nigerian economy will bear the effect of the new development. This is so because of the centrality of transportation and power to the running of firms, companies and establishments.





The proximity of Dangote Refinery and the potential reduction in fuel price, leading to a reduction in running expenditure on transportation and power, will allow employers to better remunerate their workers.





In conclusion, should Dangote Refinery meet the expectations of Nigeria, economic hostilities would reduce within families and households. While the macro effects of a working Dangote Refinery are generic and well within expert control, the micro and familial effects of the corresponding economic implications are dire specifics and not easily predictable. For a long time, prices of goods and services have consistently unevenly skyrocketed, causing the Nigeria Labor Congress to call for increased minimum wage while private citizens embarked on a 10-day protest.





The possible effects on prices of other goods and services will douse tensions within families and give workers more purchasing powers with their salaries.