With the Dangote Refinery set to deliver its first products in July, the governor of the Central Bank of Nigeria, CBN, Mr Godwin Emefiele, said yesterday that the refinery would be persuaded to sell foreign exchange earnings to banks at a good rate.
Speaking at the end of the 291st Monetary Policy Committee, MPC, meeting in Abuja, Emefiele said his team would engage the promoter of the refinery, Alhaji Aliko Dangote, to ensure that Nigerians benefitted from the venture, adding that the CBN, the Federal Government and, indeed, the country helped him set up the refinery.
The CBN boss expressed optimism that the refinery would ease the foreign exchange scarcity in the country, noting that with local refining, about 20 per cent cost of the total cost of importing petroleum products could be saved, thereby reducing prices in the long run. He, however, said it was time to exit the fuel subsidy regime.
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His words: “By the time the Dangote Refinery comes on stream, the price at which it (fuel) will be dispensed will be lower than what it is when we spend dollars to import because there will be no freight cost, no storage and all other logistics expenses.
“So we will be lucky to be having about 20 per cent savings from refining locally, rather than importing.
“But the important thing is that we have reached a point, whether we like it or not when we must exit subsidy.
“Dangote Refinery coming at this time gives us the confidence that even if we exit subsidy, the products will be available. And eventually, the interplay of market forces will also moderate the prices to a level that will help the country.
“So we are expecting that, no doubt, by the time he produces for domestic consumption, the excess will be exported by the numbers that he talked about, which we agree with.
‘’We should be able to save, conservatively, close to about $5 billion to $10 billion in foreign exchange that will come into the country.
“Whether it comes to our reserves or not is not the point, it is the fact that the dollar is available and it will be sold in the domestic market so that customers of banks who need to import do not necessarily resort to CBN for dollars.
“They can go to their banks and Dangote will sell dollars to their banks and we are going to ensure that it is done at a good market rate.
“What I would have loved to say on Monday (at the Dangote Refinery Commissioning) which I didn’t say was that the CBN, the government and the country have helped Dangote to set up that refinery.
“He is a Nigerian; Nigerians must benefit from that venture and we are going to engage him and talk to him and I am sure that being the richest man in Africa, he is going to throw a few crumbs so that the price will be lowered.”
N8trn interventions in 5yrs
Meanwhile, Emefiele revealed that the CBN had given out about N8 trillion in interventions to the private sector in the last five years.
He said: “In the last four to five years, we have done about N8 trillion in interventions to the private sector of the economy. The loans have been granted for 10 years, with a two-year moratorium and at single digit”.
The CBN boss disclosed, however, that going forward, the apex bank would reduce its quasi-fiscal activities.
MPR jerked up to 18.5%
At yesterday’s meeting, the MPC raised the Monetary Policy Rate (MPR) to 18.5 per cent from 18 per cent.
Emefiele said the strategy, which started in May last year, had been working as it had moderated the rate of inflation in the economy.
He admitted that the interest rate hike was constraining credit to the real sectors of the economy but that it remained the best option in tackling inflation.
He stated: “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Meanwhile, the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
It also retained the Cash Reserve Ratio (CRR) at 32.5 per cent and equally left the Liquidity Ratio at 30 per cent.
We look forward to cost reduction — IPMAN
Reacting to the CBN’s declaration that Dangote would sell Dollars to banks at good rate, the National President of the Independent Petroleum Association of Nigeria, IPMAN, Elder Chinedu Okoronkwo, could not be reached for comments, yesterday.
But National Operations Controller, IPMAN, Mike Osatuyi, said: “Oil marketers are very happy about the Dangote Refinery. We were tied to the global market for several decades. Now, everyone will be free to patronise the refinery.
‘’We look forward to a significant cost reduction, apparently because freight and shipping costs will not apply anymore.
“With the coming onstream of the plant, the Federal Government will be encouraged to end fuel subsidy. This might be affordable to Nigerians, unlike what it could have been in the past.”
Dangote Refinery comes with multiplier effects — OGSPAN
Similarly, the National President, Oil and Gas Service Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, said: “On a serious note, Alhaji Aliko Dangote should be commended for making this gigantic investment.
“Every patriotic Nigerian and African should be proud of this refinery. It is very huge and it comes with a lot of multiplier effects for Nigeria.
“I completely agree with the CBN governor that it will culminate in the generation of additional foreign exchange into Nigeria as well as assist the nation to conserve foreign exchange currently expended on massive importation of petroleum products.
“As a major crude oil producer, Nigeria should not have been involved in the importation of petroleum products. ‘’The nation was compelled by circumstances to go into importation. I am happy that this big refinery will enable us reduce or completely stop dependence on the global market.”
CBN should merge forex rates — NACCIMA
Also commenting, Sola Obadimu, Director General, Nigerian Chamber of Commerce, Industry, Mines and Agriculture, NACCIMA, while acknowledging the capacity of Dangote Refinery to generate forex, said CBN should rather focus on merging forex rates.
He said: “Honestly, my take is that CBN should merge these forex rates to avoid whatever might be called ‘good’ or ‘bad’ rates. And that’s the responsibility of CBN – to determine the true value of the Naira. Various exchange rates are basic ingredients for grandiose corruption as we know it.
“Yes, this is a very commendable project that has the capacity to generate forex whenever it starts to export and the proceeds would be convertible to Naira.
“At present, exporters through official channels are complaining that conversion for forex generated from exports is only available to them at official rates which may be unfair, given the fact that they never get enough forex at official rates when they need it either for imported inputs or machinery/parts.
“That’s the danger of dual or multiple exchange rates, particularly when the gaps are too wide as we have it now. But then, the government now has some stakes in the project.
‘’So they may reach some agreements on that level. But it might be preferred to have policies that encourage export activities by all as much as possible.”