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Economist Group Faults Crude Supply Delay To Dangote … Says Its Risky To Nigeria’s Economy’
The Economist Intelligence Unit (EiU), the research and analysis division of the Economist Group, has warned that further delays in crude oil feedstock to the Dangote Petroleum Refinery and Petrochemicals could jeopardise Nigeria’s economic recovery, putting more pressure on the Naira, the local currency.
It noted that the Dangote Refinery, which began production in January, has encountered setbacks in petrol production due to a shortage of crude oil feedstock.
The $20 billion facility, it stated, has 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 delays are expected to have significant economic repercussions for Nigeria, and likely to worsen the already strained relationship between public finances and the management of the Naira.
Acknowledging that the government had previously scrapped the official petrol subsidy in June 2023, the report said the practice of unofficially subsidizing petrol continues, with substantial implications for the national budget.
It further noted that this has 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.
The delay in securing a reliable pipeline of affordable crude oil feedstock was attributed to low crude production due to oil theft and underinvestment, and using crude oil to repay outstanding loans.
“The refinery has encountered a range of problems, both practical and political in nature. The most publicly discussed issue is how the refinery can secure a reliable pipeline of crude oil feedstock at affordable prices.
“NNPC, the state oil firm, has not been able to provide enough volume. The government has promised to deliver 450,000 b/d of oil to the refinery through NNPC in a pilot scheme, sold in Naira, but the state oil company is not in a position to make this a reliable arrangement.
“Crude production in Nigeria is stubbornly low, as a result of oil theft and underinvestment. Output was 1.31m b/d in July, against an OPEC+ target of 1.38m b/d.
“NNPC receives a varying minority share of this and, moreover, a sizable quantity (about 90,000 b/d) is being committed as loan collateral”, it stated further.
Accordingly, it said, the situation has been worsened by International Oil Companies (IOCs) operating in Nigeria, which demand a premium of $3-$4 per barrel over the prices they receive elsewhere.
It noted that regulators are hesitant to enforce the Domestic Crude Supply Obligation (DCSO)—which requires IOCs to sell crude to local refineries—out of concern that such enforcement might lead to divestment.
The report emphasised that producing fuel locally would significantly benefit Nigeria’s fiscal position and currency, given that petroleum products account for 15% to 20% of the country’s goods import bill.
The Dangote refinery, hailed as a transformative development, is expected to resolve the paradox of Nigeria being a major crude oil producer yet still dependent on fuel imports.
With a capacity of 650,000 barrels per day (b/d), the refinery is expected to potentially eliminate the need for fuel imports and shield local fuel prices from exchange-rate fluctuations.
“The Dangote fuel refinery is potentially transformational for Nigeria, which has always been an oil exporter and fuel importer.
“This fact is often regarded as a failure and an embarrassment by politicians, businesses and the media alike, but the new refinery has the ability to change this”, it stated.
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Central Bank of Nigeria (CBN) has introduced two accounts: Non-Resident Nigerian Investment Account (NRNIA) and Non-Resident Nigerian Ordinary Account (NRNOA), to manage funds (both in foreign and local currencies) from Nigerians abroad.
In a circular signed by its Acting Director, Trade amd Exchange Department, W. J. Kanya, the apex bank said with the NRNOA, Non-Resident Nigerians (NRNs) will be able to remit their foreign earnings to Nigeria and manage funds in both foreign and local currencies.
“The NRNOA enables Non-Resident Nigerians (NRNs) to remit their foreign earnings to Nigeria and manage funds in both foreign and local currencies, while the (NRNIA) enables Non-Resident Nigerians (NRNs) to invest in assets in Nigeria in either foreign currency (FCY) or local currency (Naira)”, the statement read.
It continued rhat “Account holders may maintain both a foreign currency (FCY) account and/or a local currency (Naira) account to facilitate transactions and participate in diverse investment opportunities”.
CBN also explained that NRNs can use their NRNIA to participate in Nigeria’s Diaspora Bond and other debt instruments issued locally specifically targeted at the Nigerian diaspora or available to the investing public.
The account is also to serve as a conduit for NRNs to manage their funds directly in a safe and secure environment, and reduce the reliance on third parties in meeting local commitments and obligations.
According to the bank, effective January 1st 2025, eligible NRNs shall have the opportunity to own any of the non- resident Nigerian accounts, subject to meeting KYC requirements which will be made available in FAQs to be released soon.
The CBN added that “This policy is without prejudice to Memorandum 17 of the CBN Foreign Exchange Manual (2018)”.
Manufacturers in Nigeria are gradually opting for natural gas as a solution to increasing diesel and petrol prices which have negatively impacted on production expenses.
Recall that following the removal of fuel subsidies by President Bola Tinubu in his inaugural address on May 29, 2023, the prices of diesel and petrol have skyrocketed, further worsening the cost-of-living crisis for people.
Recognising the potential of its vast natural gas reserves, which is over 200 trillion cubic feet, has initiated a Compressed Natural Gas (CNG) programme aimed at reducing transportation costs by nearly 50 per cent.
The initiative encourages the conversion of vehicles to CNG and aims to introduce CNG buses across major cities.
Additionally, the recent commencement of diesel sales by Dangote Refinery has led to a notable decrease in diesel prices, dropping from approximately N1,700 to N1,350 per litre. This reduction is expected to alleviate some financial pressure on manufacturers’ reliance on diesel for operations.
Industry leaders emphasise that transitioning to natural gas not only addresses immediate cost concerns, but also aligns with global sustainability goals.
The Manufacturers Association of Nigeria (MAN) has, therefore, urged businesses to adopt sustainable energy practices, as energy costs constitute 30-40 per cent of production expenses.
Commenting on the development, Managing Director of Tiget Business International Limited, Zheng Wei, said some Nigerian manufacturers are leveraging improved gas supply around Lagos to boost production despite recurring grid collapses.
Wei, who oversees one of the country’s largest footwear manufacturers, described this shift as vital to sustaining operations amid Nigeria’s power crisis.
Wei noted that while manufacturers face challenges like inflation, currency instability, and regulatory hurdles, power remains the most critical issue.
According to the MAN, energy costs make up nearly 40 per cent of manufacturers’ expenses, with limited and unstable grid supply disrupting production and reducing output.
To address this, Tiget partnered Clarke Energy to install a 6.6 megawatt Jenbacher gas power plant, sourcing gas from a supplier along the Lagos-Ibadan Expressway.
The project included assessments, engineering designs, and maintenance services, enabling Tiget to transition to cleaner, more efficient, and cost-effective energy.
Wei said, “The gas plant is producing cleaner electricity and saving us significant operational costs compared to diesel. It has addressed efficiency issues, making our operations more sustainable”.
On hos part, the Managing Director of Clarke Energy for sub-Saharan Africa, Yiannnis Tsantilas, emphasised that adopting resilient and cost-effective energy solutions is key to sustainable productivity for manufacturers.
He commended Tiget’s leadership for enhancing Nigeria’s economy by improving local market access to quality footwear, reducing unemployment, and increasing investment.
Tiget, incorporated in Nigeria in 2020 and based in Sagamu, imports polyvinyl chloride as a key raw material for its footwear products.
The company plans to expand its operations through backward integration and establish offices across Nigeria and Africa.
Wei expressed confidence in Nigeria’s potential as a regional economic hub, citing its young, talented population and vibrant local market.
He, however, acknowledged the challenges of high fuel costs on logistics and competitiveness, and called for investments in refineries to provide feedstock for plastic industries and a stable gas supply to support manufacturers, arguing that these measures would drive industrial growth and enhance Nigeria’s economic stability.
With a population exceeding 220 million, Nigeria’s dynamic market presents significant opportunities.
Tiget, Wei said, aims to contribute by producing high-quality footwear that aligns with Nigeria’s rich cultural identity and evolving fashion industry.
The Transmission Company of Nigeria (TCN) has debunked last week’s declaration of grid collapse due to power disruption, saying it was due to the tripping of the Benin-Omotosho Line, not a national grid collapse.
Recall that the media widely reported last week that the national grid had experienced its first collapse in 2025.
TCN spokesperson, Ndidi Mbah, said the report was a misinformation.
“The TCN, hereby states that the nation’s grid did not experience any collapse today, contrary to the widely published misinformation in the media.
“Earlier today, at about 13:41 Hrs, the Osogbo–Ihovour line tripped, followed by the tripping of the Benin–Omotosho line. These consequently affected bulk supply to only the Lagos axis alone”, Mbah explained.
She also clarified that at about 13:00 pm, just before the tripping, total generation on the grid was 4,335.63MW, amd that after the trippings, generation was 2,573.23MW, showing clearly that the grid did not experience a collapse.
She noted that the transmission line tripping affected Egbin, Olorunsogo, Omotoso, Geregu, and Paras, but these have all been restored except for the Benin-Omotoso 330kV line whose restoration is ongoing.
“As TCN continues to work hard to put in place a robust transmission grid, in spite of prevailing challenges. It is imperative that we understand the negative impact of deliberately misinforming the public and the value of disseminating true and verifiable facts”, Mbah said.
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