CBN to provide forex support for Dangote refinery

11 Jan 2016
Chibuike Oguh


Dangote petrochemical refinery is considered to be the single largest refinery in the world, capable of processing 650,000 barrels of oil per day.

Governor, Central Bank of Nigeria, Godwin Emefiele

The Central Bank of Nigeria has pledged it would facilitate access to foreign exchange for the construction of the $14 billion Dangote Group’s petrochemicals refinery and fertilizer plant in Lagos.

This support comes at a time of scarcity in the forex market in Nigeria, due to the country’s dwindling foreign reserves as a result of the slump in oil prices.   

Dangote Group is currently building what is considered to be the single largest refinery in the world, capable of processing 650,000 barrels of oil per day. When completed, the refinery would make Nigeria self-sufficient in petroleum products and a net exporter to other countries in West Africa. The fertilizer plant would be able to produce 2.8 million metric tonnes per annum of urea and ammonia.

Speaking during a tour of the complex in Lekki on Sunday, CBN Governor, Godwin Emefiele, said the apex bank would ensure that enough forex is available for the importation of equipment until the project is completed in 2018.

“That is the kind of project we think we should support and we think that we need to encourage more Nigerians to begin to think like Aliko Dangote,” Emefiele said.

“He will be selling $6 billion to Nigerians in a year. So, in two and a half years, he would sell dollar to us even more than we will probably give to him. If he wants naira, we will give him naira at concessionary prices. If he wants dollar to import the equipment, we will give him,” the Governor of the CBN stated.

Dangote said he embarked on the project to conserve Nigeria’s foreign exchange and diversify her oil-dependent economy.

“Almost 38 per cent of CBN’s foreign exchange is spent on importation of petroleum products. But we can serve the whole West African market,” Dangote said. “The CBN will assist in terms of long-term funding through the banks and even directly now because they have actually helped us quite a lot.”

Due to declining oil prices, which have fallen by nearly 70 percent in the past 18 months, Nigeria’s oil revenues have reduced by nearly 50 percent. The CBN has embarked on a strict foreign exchange regime to defend the weakening domestic currency and prevent its value from dropping.  

In June last year, the apex bank banned the sale of foreign exchange for the importation of about 41 goods and services. This measure is to reduce high forex demand and manage the country’s foreign reserves, which have also fallen. As of January 7, 2016, the reserves had fallen to $28.93 billion. More recently, the CBN has imposed stringent measures on banks and bureau de changes which sell foreign exchange to businesses and individuals.

Chibuike Oguh is Financial Nigeria's Frontier Markets Analyst

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