In the downstream sector, there is a lot of hope that the much-anticipated Dangote refinery will change the narrative this year, according to the people involved.
The Dangote refinery, which will have a capacity of 650,000 barrels per day (bpd) and is located in the Lekki area of Lagos, is expected to become Africa’s largest refinery when it begins operations this year.
The Dangote petroleum refinery, according to the Centre for the Promotion of Private Enterprise (CPPE), an economic advocacy group, is one of the key expected drivers of growth that will have a positive impact on the downstream sector of the Nigerian economy by 2022.
According to a recent Economic Report for 2022 published by Financial Derivatives Company Limited, a financial institution, the Dangote Refinery will help to stimulate growth in Nigeria’s downstream sector while also improving petroleum product distribution throughout Africa.
Bismarck Rewane, the Managing Director of Financial Derivatives Company, cautioned, however, that the refinery, even if it were to become operational, would not be a panacea for Nigeria’s economic woes in the long run.
“The commissioning of the Dangote Refinery will undoubtedly improve product distribution throughout Africa. Will the Dangote refinery be the solution to Nigeria’s problems? The answer is a resounding no. “However, the company intends to turn Nigeria into a net exporter of refined petroleum products,” he continued.
The CPPE’s Chief Executive Officer, Dr. Muda Yusuf, stated in a Nigeria Economic Outlook for 2022 that the implementation of the Petroleum Industry Act (PIA) in 2022 is expected to have a positive impact on the country’s economic outlook.
Because of the reforms based on the PIA, we expect to see positive outcomes in the oil and gas sector as investor sentiment improves in the wake of the reforms.” This, however, will be dependent on the level of political will that is demonstrated in order to drive the implementation of the Act’s provisions.
“It is also anticipated that the Dangote refinery, which is expected to come on stream in 2022, will have a positive impact on the downstream sector of the economy,” he continued, adding that
The average oil price in 2022 is expected to exceed the budgeted benchmark of sixty-two dollars ($62) per barrel, allowing for some fiscal wiggle room, according to Mr. He said. This, he explained, would be fueled by increased energy demand as a result of the global recovery of economic activity in general.
This trajectory, according to Yusuf, is expected to have an impact on Nigeria’s foreign reserves while also strengthening the ability of the Central Bank of Nigeria (CBN) to support the foreign exchange market. He did, however, state that if the Dangote refinery is operational by 2022, fiscal pressure on the economy may be alleviated, but not completely eliminated.
According to the economist, because the service sector is less vulnerable to the structural constraints of the economy, particularly those affecting the real sector of the economy, the service sector will continue to outpace the real sector in the year 2022 and into the next decade.
“The service sector of the Nigerian economy will continue to outpace the real sector of the economy in 2022,” he predicted. In the third quarter of 2021, the contribution of the service sector to GDP was 50%, and the sector’s growth rate was 8.41% during the same period last year. The contribution of the oil sector to GDP was 7.5 percent, while the contribution of the non-oil sector was 92.5 percent. While the industrial sector experienced a 1.63 percent contraction, agriculture experienced a 1.2 percent increase.”
Yusuf predicted that the Gross Domestic Product (GDP) growth would remain fragile at around three percent, noting that the sustained recovery in the global oil price would be the primary driver of growth.