Economic outlook by the Centre for the Promotion of Private Enterprise (CPPE), and the Financial Derivatives Company Limited, see the coming on stream of the Dangote Petroleum Refinery as a key growth driver that will impact positively on the downstream sector of the Nigerian economy this year.
Specifically, Financial Derivatives, a business advisory firm, in its recent Economic Report for 2022, noted that the Dangote Refinery will also enhance petroleum products distribution across Africa.
The Managing Director/CEO, Financial Derivatives Company, Bismarck Rewane, however warned that the refinery, when operational, would not be a final solution to Nigeria’s economic crises.
“The coming on stream of Dangote Refinery will no doubt enhance product distribution across Africa. Will Dangote Refinery solve Nigeria’s problem? The answer is no. But the company is going to make Nigeria an exporter of refined petroleum products,” he said.
In the Nigeria Economic Outlook for 2022, released by the CPPE, an economic advocacy group, its Chief Executive Officer, Dr. Muda Yusuf, said an activation of the Petroleum Industry Act (PIA) is expected to impact positively on the economy.
Yusuf said: “We expect to see positive outcomes as investor sentiments in the oil and gas sector improve on account of the reforms anchored on the PIA. This will however depend on the political will deployed to drive the implementation of the provisions of the Act.
“It is also expected that the coming on stream of the Dangote Refinery in 2022 will also impact positively on the downstream sector of the economy.”
He estimated the average oil price to exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom. This, he noted, would be powered by higher energy demand driven by the recovery of economic activities globally.
“This trajectory is expected to impact on our foreign reserves and strengthen the capacity of the Central Bank of Nigeria (CBN) to support the foreign exchange market,” Yusuf said.
He, however, added that if the Dangote Refinery comes on stream this year, the fiscal pressure on the economy may abate, but not completely eliminated.
We expect to see positive outcomes as investor sentiments in the oil and gas sector improve on account of the reforms anchored on the PIA. This will however depend on the political will deployed to drive the implementation of the provisions of the Act.
Structural constraints
Yusuf also argued that the service sector is less vulnerable to the structural constraints of the economy.
He continued: “The service sector of the Nigerian economy will continue to outpace the real sector in 2022. In the third quarter of 2021, the service sector’s contribution to GDP was 50 per cent and the growth of the sector was 8.41 per cent.
“The oil sector contribution to GDP was 7.5 per cent while the non-oil sector contribution was 92.5 per cent. While the industrial sector growth contracted by 1.63 per cent the agriculture grew by 1.2 per cent.”
The economist further said the Gross Domestic Product (GDP) growth would remain fragile at about three per cent, with growth driven by sustained recovery of global oil price.
He said: “We expect that the average oil price in 2022 will exceed the budgeted benchmark of $62 per barrel, offering some fiscal headroom. This would be powered by higher energy demand driven by the recovery of economic activities globally.”
On the downside risks, he said the economy will continue to present huge opportunities for investors across all sectors.
“This is on account of the resourcefulness of the Nigerian people, especially the entrepreneurs. Other inherent strengths of the Nigerian economy include the market size, the population, and the demographic characteristics,” he added.
