Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, in his goodwill message at the inauguration of the Dangote refinery on Monday, disclosed that the Dangote Group had paid back about 70 per cent of the loans it took to construct the refinery. Emefiele highlighted economic gains from the project to include savings of up to $30 billion annually in foreign exchange, and additional $10 billion in inflows.
Emefiele said one of the expected benefits of the refinery was savings for the country in foreign exchange spending worth between $25 billion to $30 billion annually.
The CBN governor noted that Dangote Group had started repaying some of the commercial loans even before the inauguration of the facility, which, he noted, reflected the commercial capability of the group and its chairman.
Emefiele added, “I am pleased to inform everyone today that following extensive repayments, outstanding debt has dropped appreciably from over $9 billion to $3 billion.
“I must at this juncture appreciate all the participating local Nigerian banks, who did not only partner with the project through effective financing but were keenly aware of the importance of the project for our nation. They provided immense support and exceptional understanding, even when interest payments and principal repayment had fallen due.”
Emefiele recalled that in September 2013, when Dangote announced his plans for the refinery, it was estimated to cost about $9 billion, of which $3 billion was projected as equity investment by the Dangote Group and the balance financed through commercial loans.
He explained that due to an array of factors, the project was eventually completed with a total of $18.5 billion with funding distributed into 50 per cent equity investment and 50 per cent debt finance.
The CBN governor said, “This project avails Nigeria with significant savings both in terms of foreign exchange and in easing the fiscal burden on the federal government. Available data at the Central Bank of Nigeria as of 2014, shows that at least 30 per cent of the foreign exchange required to meet Nigeria’s import needs went into the importation of refined petroleum products.
“It is instructive to note that according to the balance of payments statistics, the cost, including freight, of petroleum products imports into Nigeria doubled over a five-year period from about $8.4 billion in 2017 to $16.2 billion, indicating an annual average of $11.1 billion, before rising further to $23.3 billion by end-2022.
“At this rate, the average annual cost of petroleum products imports to Nigeria could reach $30 billion by 2027 if we continued to rely on petroleum imports. These figures suggest that the refinery could engender foreign exchange savings, to the country of between $25 billion and $30 billion annually.”
He added that the impact of these savings would be directly reflected in Nigeria’s foreign exchange reserves by reducing the pressure on the balance of payment.
Emefiele added, “This project will equally provide support to the fiscal operations of the government as it could help ease budget constraints of funding the petroleum subsidy and engender fiscal savings.
“Available data indicate that, over a five-year period, fuel subsidy in Nigeria rose more than nine-folds from about N154 billion in 2017 to over N1.43 trillion before another three-fold rise to N4.4 trillion by the end of 2022.
“A simple straight-line projection suggests that this figure could surpass N7 trillion within the next three years if we do not tackle it effectively.
“Thankfully, the Dangote Refinery and Petrochemicals could spare Nigeria about N5 to N7 trillion annually in fiscal expenditure of the federal government over the next five years.”
Emefiele pointed out that the project was one of the many efforts of the CBN to support Buhari’s drive to diversify the economy.
He said, “We have provided interventions in many critical segments of the real sector, a few of which I will now mention, with your permission. The CBN Real Sector Facility is implemented through two interventions, namely Real Sector Support Facility through Differentiated Cash Reserve Requirement (RSSF-DCRR) and Covid-19 Intervention for Manufacturing Sector. Under this facility, the CBN has released the sum of N2.56 trillion to 462 projects in agriculture, manufacturing, mining, and services sectors.
“In addition, the CBN has also supported other priority sectors and segments of the economy, with cumulative N3.60 trillion released to the manufacturing sector to support the domestic productive capacity of industries.
“The sum of N2.09 trillion has been disbursed to various projects in the agricultural sector, particularly through the Anchor Borrowers’ Programme, which has supported 4.56 million smallholder farmers cultivating over 5.96 million hectares of agricultural commodities across the country.
“The Bank has also supported infrastructural development with the sum of N2.28 trillion to bridge the nation’s infrastructure gap and improve access to energy for domestic production.”
Deji Elumoye, Nume Ekeghe and Peter Uzoh