The 650,000-barrels-per-day Dangote refinery is expected to boost Nigeria’s external earnings by drastically reducing imports of fuel, contributing to the regional supply of petroleum products, the World Bank has said.
The World Bank said this in its latest Africa’s Pulse report, a biannual analysis of the near-term macroeconomic outlook for the region.
“Nigeria is set to emerge from the current account deficit of -0.4 percent of GDP in 2021 to a surplus of 1.1 percent in 2022, and edge up to 1.2 percent in 2023,” it said.
The current account balance is expected to improve in 2022 and 2023 relative to 2021 due to higher oil prices, which offset lower oil output, according to the report.
“Higher import prices of food and refined petroleum products weigh on the current account surplus,” the World Bank said. “A mega-refinery project that is expected to be completed in 2023 will boost external earnings by drastically reducing imports of fuel and at the same time contribute to the regional supply of petroleum products.”
In January this year, the African Petroleum Producers Organisation said that the Dangote refinery would reduce petroleum product imports across Africa by 36 percent upon commencement of operations.
The World Bank report said economic growth in Nigeria has continued to suffer from an underperforming oil sector.
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It said oil output was down by 11.8 percent year-on-year in the second quarter of 2022 against 26 percent in the first quarter.
The World Bank said Nigeria’s heavy reliance on imported petroleum products and constrained oil production denied the country favourable terms induced by the Russia-Ukraine conflict.
According to the World Bank, debt pressures in Nigeria have increased as debt service to revenue is projected to increase to 102.3 percent by the end of 2022.
“This suggests that high oil prices do not translate into government receipts due to elevated subsidies for petroleum products,” it said.
“The combination of low production in the oil industry and unsustainable subsidies is one of the main obstacles to attaining debt sustainability.”
The Nigerian Upstream Petroleum Regulatory Commission, in its oil production status report for August 2022, revealed that Nigeria’s production declined to 972,394 barrels per day, down 30.22 percent compared to January’s output.
“The downward trend in production recorded after the plunge in oil prices in 2014 persists in the third quarter of 2022,” the World Bank said.
“This low production prevents the country from benefiting from elevated oil prices as oil accounts for 80 percent of Nigeria’s external revenues.”
