According to news reports, the International Monetary Fund (IMF), in its latest report on Nigeria's economy is projecting that Nigeria's Dangote Refinery would boost the country's economy when it commences production by 2022 as it would significantly improve the country's current account balance. Beyond its ability to meet the full demand for domestic consumption of refined petroleum products-which are almost all imported at present, the refinery also has the potential to catalyze more domestic crude oil production and boost GDP growth since crude oil for local refining is not subject to OPEC quota.
About 80% of the refined petroleum products consumed in Nigeria are imported and this implies huge FX requirements with its effect on the current account balance. Nigeria's refineries have long operated at low levels due to many years of underinvestment and poor maintenance. The country's external position worsened in 2020, as continued reliance on oil earnings and hot money has left the country vulnerable to shocks. Current account deficit is projected at 3.4% of the GDP in 2020. In 2021, while we expect current account deficit to narrow, supported by a gradual recovery in global economic activities and firming crude oil prices, we still estimate a current account gap at USD10.80bn (2.31% of the GDP).
Dangote Group's refinery, with a planned installed capacity of 650,000 bpd is scheduled to come on stream in 2022 following delays caused by the corona virus pandemic. The refinery is also built with a 5-year plan to double capacity. It is expected to be the Africa's biggest oil refinery and the world's biggest single-train facility, upon completion. The refinery is designed to produce up to 50 million litres of gasoline and 15 million litres of diesel a day. Nigeria's daily demand for refined crude oil was estimated to be around 442,000bpd as of 2018, implying that Dangote Refinery alone can more than meet local demand and also earn FX for the country through exports.
Given the scale of demand for petroleum products in both Nigeria and the entire ECOWAS region as a whole, the country stands to gain significant export revenues if it increases downstream production. The government has also been recently promoting the establishment of modular refineries. A small, privately owned refinery located in Ogbele, Ahoada, in the Rivers state expanded its refining capacity to 6,000 b/d in January 2020 according to EIA reports. The expansions completed at the refinery will allow it to produce and market other fuels such as heavy residual fuel oil, marine diesel, and kerosene.
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