With a $500 million modular refinery coming into the limelight by 2023, Ondo state will experience an improvement in its key macroeconomic indicators.
On 3rd April 2019, Crown Refinery and Petrochemical Limited’s—a privately owned company whose core business is into refining of crude oil into premium petroleum products, entered a Memorandum of Understanding (MOU) with the Ondo state government to build a refining facility in the state.
The proposed project, due for completion in 36 months, will have an initial capacity to refine about 30,000 BPSD but would be scaled up to 60,000 BPSD within the next five years, according to Kazeem Adeleke, chairman of the company in a statement.
The state’s free trade zone in Eruna Ogboti village, Ilaje local government area will be the refinery’s abode.
The facility will be doing more than just crude refining to churning out 120,000 tons of base oil and 25,000 tons’ lubrication oil yearly, helping to bridge the supply gap of petroleum products in Africa’s largest economy.
Just like the major benefits arising from infrastructural developments in a country, the modular refinery is expected to rub positively on the developments of the state by giving a boost in economic activities of the state.
It will also empower the citizenry of the state by creating employment opportunities which will, in turn, increase their ability to command more goods and services.
Furthermore, it will open up the state to further domestics and foreign inflows
which will help in increasing the states revenue buffers for the south-western states in Nigeria. The state borders Ekiti state to the north, Kogi state to the northeast, Edo state to the east, Delta state to the southeast, Ogun state to the southwest, and Osun state to the northwest.
In 2017, the state boasted a gross state product (GSP) of N1.6 trillion which is about 1.4 per cent of Nigeria’s GDP, according to data compiled by BusinessDay.
With the completion of the refinery, analysts say they expect a sporadic increase in the state’s economic activities since crude oil happens to be the country’s bread and butter.
“The establishment of the modular refinery is a positive development for the state given its attendant effects in stimulating economic activities, creating job opportunities, attracting private sector investments, all of which are expected to enhance the productive capacity of the state and improve its GDP”. Gbolahan Ologunro, an equity research analyst at Lagos-based CSL stockbrokers said.
In the monetary term, Ondo state is the 3rd largest state in the south-west, 7th in the South and 16th economy in Nigeria.
Home to some 4.9 million people, the population of the state represents about 2.4 per cent of the national population, most of whom are agriculturalist.
Being the 4th most populated state in the South-West, 9th in the south and 18th in the country, Ondo state raked in total revenue of N65.5 billion which accounts for about 2.2 per cent of all states’ total revenue in 2017.
Ologunro explained that given the size of the state, the modular refinery should further consolidate the efforts of the state governments in improving its internally generated revenue as the economic activities rev up and clustering of industries gather momentum in the state.
“Over the long term, this should reduce the dependency of the state on FAAC allocation and place it on a better footing in mobilizing resources internally to finance its overheads and accelerate the standard of living of its populace”, he added.
Ondo state has a Land Area of 15,800 per kilometre square, representing about 1.7 per cent of Nigeria’s land mass, 3rd in the South west, 6th in the south as well as 25th in the country.
In terms of sector’s contribution to the states GDP in 2017, the services sector accounted for the largest with 47 per cent, followed by oil accounting for 36 per cent.
The agricultural and the non-oil industry occupied the third and the fourth spots accounting for about 11 and 6 per cent of the GSP respectively. The Manufacturing (mainly food, beverages and tobacco, but also textile, apparel and footwear) was 66 per cent of the state’s non-oil output while construction was 32 per cent.
In monetary terms, the state’s N174.7 billion agricultural output was 0.73 per cent of Nigeria’s agricultural sector. It was also the 3rd in the south-west, 5th in the south and 21st in the country while its N96.7 billion non-oil industrial output was 0.6 per cent of Nigeria’s non-industrial output, coming 4th in the south-west, 9th in the south and 17th in the country.
Service output of N786.3 billion in Ondo state accounted for 1.2 per cent of Nigeria’s service output, 4th in the south-West, 8th in the south and 11th in the country.
On the benefit that the project will have on the states, Kazeem explained that the company will be providing several infrastructural projects in the states and would turn around unemployment for the state’s indigenes.
“The project host communities would benefit from infrastructural developments as we are partnering with Simens company to provide over 40 megawatts of power for the state. We are also going to be awarding scholarships program, entrepreneurial opportunities as well as 2000 direct and indirect employment opportunities”, he noted.
The Nigerian and the West African market’s demand for petroleum products have been on the increase, but this demand is largely underserviced by the existing supply capacities of refineries across the region.
Amid a much higher demand for the product relative to supply is the fact that the West African sub-region still imports most of her refined petroleum product due to poor political will to develop a functional refinery. Nigeria, Africa’s biggest oil producer has four refineries that have long sat idle.
BusinessDay in a report noted that Nigeria’s state-owned oil firm and sole importer of crude oil into the country recorded a loss in the full year 2018, despite Brent crude averaging above $70 in the larger part of the year. This poor performance is seen as a show of shame when compared with its counterparts from Brazil, China, Norway and Russia.
Despite this loss overtime, Nigeria has continued to maintain a status quo that is seen as unsustainable and detrimental to its economy. In 2018 alone, the country spent N730.9 on subsidy which it has stylishly called under-recover, BusinessDay reported.
In light of these shortfalls in supply, private players have increasingly intervened to bridge that gap.
Africa’s richest man and chairman of Dangote refinery will be flagging of his refinery with a production capacity of 650,000 bpd in 2021.
“The market is deep enough! For us, it is more of contributing to an industry output that will meet the demand,” Kazeem noted.
Also, a note should be taken of the wider West African market, which provides additional opportunity for export.
On his part, the governor of the state, Rotimi Akeredolu said the state will continue to render utmost support in seeing that the firm achieve success in line with its vision and mission statement.
According to him, the investment is a much-needed one for the state to create jobs and open us the eco?
MICHAEL ANI
