Emefiele: Inflation Pushed Dangote Refinery Project Cost To $15bn
Lists benefits of the projects to the country Says agreement sealed with NNPC, oil giants
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele yesterday disclosed that inflation had pushed the cost of building Dangote Refinery and Petrochemical Plant and other projects from $12 billion to $15 billion.
Emefiele, also, revealed that Dangote Group, a Nigerian multinational industrial conglomerate, had sealed agreements with the Nigerian National Petroleum Corporation (NNPC) and other oil producing multinationals to purchase crude oil locally to feed the 650,000-barrel-per-day refinery.
He made this disclosure yesterday at a session with journalists after an inspection of the Dangote Refinery and Petrochemical Plant and Fertilizer Plant in Lagos alongside the country’s leading captains of industry.
Emefiele inspected the facility in the company of President of Dangote Group, Alhaji Aliko; Chairman of Geregu Power Plc, Mr. Femi Otedola and Chairman of Channels Television, Mr. John Momoh, among others.
At the session with journalists, Emefiele said: “As far as I know, as at the last count, in terms of the cost of this project, it may be close to $15 to $16 billion at this time.
“When this project was contemplated, when it was still on the drawing board about six years ago, before it started four years ago, it was meant to be about $7.5 billion.
“That time, $3.75 billion was to be raised by equity himself (Dangote), and then, local banks -$1.75; I think foreign banks -1.75 billion. And like you heard, this project cost has now moved up to over $15 billion.”
The apex bank said Dangote had assured him that the purchase of Nigerian crude by the refinery would not affect Nigeria’s 1.6 million barrels per day mandatory export volume as allocated to it by the Organisation of Petroleum Exporting Countries (OPEC).
He disclosed that Dangote Group would actualise upon the discussion and agreement between Dangote and its suppliers, mainly Nigerian National Petroleum Corporation (NNPC) and oil producing companies in the country.
CBN’s governor said by buying crude in Naira and selling refined petroleum products in Nigeria in naira, the company would save the country a lot of foreign exchange and help to strengthen the local currency.
“By being a country that is lucky to have a refinery of this size, what you will find is that, I think Nigeria’s production capacity right now by the OPEC arrangement is about 1.6 million barrels per day.
“Because we are going to be refining locally, Nigeria will continue to export its 1.6 million barrels per day. That is what Dangote said and this 650,000 barrels per day. That is based on agreement and discussion with NNPC or with other oil producing multinationals operating in the country.
“Dangote could buy his crude in naira, anchored in the platts and refine it and produce it for Nigeria’s use in naira. So, that is where the element where FX is saved for the country becomes very clear,” Emefiele said.
He also said he was optimistic that by refining in Nigeria, all the cost associated with demurrage for import as well as the costs associated with freight will be totally eliminated.
According to him, that will make the price of petroleum products cheaper in naira in Nigeria.
He noted the refinery, which will be producing more than the country’s requirement for white products, would equally create opportunities for Nigerian investors to start acquiring small vessels and begin to buy from the refinery in naira to export to other African countries.
While such an arrangement will increase the volume and revenue in Naira for Dangote Refinery, however, Emefiele pointed out: “As a central banker, it means it is helping to push Naira into the ECOWAS subregion as a currency. That is a big matter of interest for me. So, you cannot almost quantify the benefit from having this refinery in Nigeria.”
He said inflation, based on what Dangote told him, had pushed the total cost of the refinery and other projects to over $15 billion at the moment.
CBN’s governor acknowledged that the projects would save about 41 per cent of foreign exchange spent on importation, noting that the projects were a testament of Dangote’s commitment to save Nigeria.
By this time next year, Emefiele disclosed that Nigeria’s cost of importing petroleum products, polyethylene, polypropylene, fertiliser or other ammonium products, currently being imported, would be saved.
As a result, according to CBN’s governor, Nigeria’s reserve will be saved.
Emefiele said: “It will help us so that we can begin to focus on importing more important items that we cannot produce in Nigeria today. I have always said it and in the last four years I have said it on every trip that this project that Dangote has embarked upon, the Central Bank of Nigeria has over N100 billion commitments in the intervention.
“Fertiliser, about N50 billion, and on the petrochemical, about N75 billion and that is the same way we also have a few other people that are involved in accessing our intervention facilities.
“We are saying that as long as you access our intervention facilities and you put them to good use to the extent that Nigeria benefits from this, we will provide whatever you need in foreign exchange to import your equipment so that Nigeria can begin to operate the way other countries operate again.”
The apex bank chief said that one of his wishes was to see Dangote Refinery begin operation before he exits the apex bank as the governor.
After Emefiele’s conversation with journalists, Dangote said the main idea of carrying out such project was to encourage other Nigerians to commit and invest in Nigeria for the growth of the county.
He noted that development such as the one going on at the project site were not only targeted at saving foreign exchange but to also help in building capacity of Nigerians to be able to take up those skills that were currently sought after abroad.
He said: “What we have actually done here is to make sure that we pull other people so that they would also continue with this sort of growth for our county, Nigeria, because this is the only way that we can create jobs.
“You see, development like this is not only to save foreign exchange. It’s also to create capacity. I’m sure you have gone round, you have seen Nigerians that we have actually trained in terms of welding, in terms of erection, in terms of electrical fittings and whatever.”
Citing a lady that made a presentation on the process of refining crude oil, during the press conference, after the tour, whom he explained was one of the fresh graduates the group took to India, Dangote said that was the kind of contribution he expected to be happening in the country.
He added that when the projects came on stream and if the Petroleum Industry Bill (PIB) was passed into law, Nigeria would no longer have issues about bringing foreigners to come and assist in the development of the Nigeria oil and gas industry or any other major industry.
While thanking the CBN governor for supporting them through his import substitution or backward integration strategy, the richest black man on earth, however, said import substation was one area that Nigeria needed to focus on.