In a bid to enhance the value of the naira, financial experts are advocating for an increase in the production of crude oil within the country.
Johnson Chukwu, the founder of Cowry Asset Management Limited, emphasized that while the Dangote Refinery would alleviate pressure on foreign exchange, its impact would be fully realized only with an upsurge in crude oil production. Chukwu explained that the commencement of operations at refineries such as Dangote and Port Harcourt would diminish the country’s crude export. He stressed the need for a simultaneous increase in crude production to compensate for any reduction in revenue resulting from allocations to local refineries.
Chukwu stated, “We have to increase crude production because whatever is going to local refineries will be from the increment and not from the existing 1.3 or 1.4 barrels we produce daily. If we don’t do that, it simply means what we save from fuel import would be lost to export earnings from crude.”
Kingsley Chinda, another analyst, highlighted that the anticipated 650,000 barrel per day capacity of the Dangote Refinery is poised to meet the entirety of Nigeria’s refined petroleum products demand. Chinda outlined the refinery’s potential to generate foreign exchange earnings for Nigeria through the export of 40% of its products, thus reducing the need for fuel imports and easing pressure on the naira exchange rate.
Chinda explained, “By reducing or eliminating the need for fuel imports through the Dangote Refinery’s production, it would reduce the demand for dollars in the importation of fuel. This decreased demand for foreign currency can help strengthen the naira against the dollar.”
Moreover, Chinda highlighted the broader positive impacts of the Dangote Refinery on Nigeria’s economy, citing its potential to attract foreign investments, instill confidence in international investors, and contribute to exchange rate stability. The combination of reduced imported inflation and increased foreign direct investment positions the Dangote Refinery as a pivotal catalyst for economic growth and stability in Nigeria.
