Analysts Bank on Dangote Refinery to Realise Nigeria’s 2022 Economic Growth Projection

Peter Uzoho

Economic policy analysts at the Centre for the Promotion of Private Enterprise (CPPE) and the Financial Derivatives Company (FDC) Limited have hinged the growth of the downstream sector of the Nigerian oil and gas sector and the economy in general on the Dangote Refinery.

The CPPE, an economic advocacy group, identified Dangote Petroleum Refinery as one of the key expected drivers of growth that would impact positively on the downstream oil sector of the Nigerian economy in 2022.

This is just as the FDC, a Lagos-based financial advisory and research company, in its recent Economic Outlook Report for 2022, expressed firm belief that Dangote Refinery would boost the growth of the downstream sector of the nation’s oil and gas industry and enhance petroleum products distribution across Africa.

Africa’s richest man, Alhaji Aliko Dangote, is building a 650,000 barrels per day oil refinery in Lagos, and the facility is expected to commence operation around the second quarter of this year.

The Managing Director/Chief Executive Officer of FDC, Mr. Bismarck Rewane, however, warned that the refinery, when operational, would not be a final solution to Nigeria’s economic crises.

“The coming on stream of Dangote Refinery will no doubt enhance product distribution across Africa. Will Dangote refinery solve Nigeria’s problem? The answer is no. But the company is going to make Nigeria an exporter of refined petroleum products,” he said.

Also, in the Nigeria Economic Outlook Report for 2022 released by the CPPE, its Chief Executive Officer, Dr. Muda Yusuf, said the activation of the Petroleum Industry Act (PIA) in 2022 and the coming on stream of the Dangote Refinery were expected to impact positively on the economic outlook.

“We expect to see positive outcomes as investor sentiments in the oil and gas sector improve on account of the reforms anchored on the PIA.

“This will however depend on the political will deployed to drive the implementation of the provisions of the Act. It is also expected that the coming on stream of the Dangote refinery in 2022 will also impact positively on the downstream sector of the economy,” Yusuf said.

He said the average oil price in 2022 was expected to exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom.

This, he noted, would be powered by higher energy demand driven by the recovery of economic activities globally.

“This trajectory was expected to impact on our foreign reserve and strengthen the capacity of the Central Bank of Nigeria (CBN) to support the foreign exchange market,” Yusuf said.

He added that if the Dangote Refinery comes on stream in 2022, the fiscal pressure on the economy might abate, but not completely eliminated.

According to the economist, because the service sector is less vulnerable to the structural constraints of the economy, especially the real sector of the economy, it will continue to outpace the real sector in 2022.

He said, “The service sector of the Nigerian economy will continue to outpace the real sector in 2022. In the third quarter of 2021, service sector contribution to GDP was 50 per cent and the growth of the sector was 8.41 per cent. Oil sector contribution to GDP was 7.5 per cent while the non-oil sector contribution was 92.5 per cent. While the industrial sector growth contracted by 1.63 per cent, agriculture grew by 1.2 per cent.”

Yusuf said the Gross Domestic Product (GDP) growth would remain fragile at about three per cent, pointing out that the key expected drivers of growth would be sustained recovery of global oil price.

He said, “We expect that the average oil price in 2022 will exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom. This would be powered by higher energy demand driven by the recovery of economic activities globally.”
The analyst noted that despite the downside risks, the economy would continue to present huge opportunities for investors across all sectors.

“This is on account of the resourcefulness of the Nigerian people, especially the entrepreneurs. Other inherent strengths of the Nigerian economy include the market size, the population, and the demographic characteristics,” he added.