The Economist Intelligence Unit has issued a warning that further delays in crude oil feedstock to Dangote Petroleum Refinery and Petrochemicals could jeopardise Nigeria’s economic recovery and put additional pressure on the naira.
The research and analysis division of the Economist Group said refinery, which began production in January, had encountered setbacks in petrol production due to a shortage of crude oil feedstock.
It said the $20 billion facility had successfully exported various products, including fuel oil, naphtha, nitrogen fertilisers, gasoil, jet fuel, and diesel but has been unable to ramp up petrol production due to challenges in sourcing adequate crude oil.
The report said though the government had previously scrapped the official petrol subsidy in June 2023, the practice of unofficially subsidising petrol continues, with substantial implications for the national budget.
It pointed out that this had led to increased currency losses, contributing to a widening budget deficit that has become increasingly difficult to manage and could force the Central Bank of Nigeria to revert to stronger management of the currency.
“As the Federal Government unofficially subsidises petrol (the official subsidy was scrapped in June 2023), currency losses feed into a widening budget deficit that is becoming more challenging to finance.
This provides extra incentive for the central bank to revert to stronger management of the currency, as we already expect, but the degree of market intervention could become heavier.
Meanwhile, ongoing fuel imports would reduce the current-account surplus from the 1.9% of GDP that we currently project for 2025, potentially leading to lower foreign reserves and the return to a more rigid and unstable foreign-exchange system,” it said.
