Forex Demand to Drop as Refineries Begin Operations

The pressure on the Central Bank of Nigeria (CBN) to devalue the naira due to dwindling foreign exchange reserves, is likely to ease with the resumption of operations of the Port Harcourt and Warri refineries, THISDAY’s investigations have revealed. This is coming as the managing directors of the refineries will today present status reports on the plants to the management of the Nigerian National Petroleum Corporation (NNPC). NNPC operates three refineries with a combined capacity of 445,000 barrels per day (bpd). They are the 210,000bpd Port Harcourt refinery, the 125,000bpd Warri refinery and petrochemical plant, and the 110,00bpd Kaduna refinery and petrochemical plant. The commencement of operations at the Port Harcourt and Warri plants, will boost the country’s local refining output and reduce the volume of petroleum products imported into the country, thus easing pressure on the naira and foreign exchange demand by at least 50 to 60 per cent. According to CBN data, fuel imports alone account for 35 per cent of forex demand in the market. Officially, the Petroleum Products Pricing Regulatory Agency (PPPRA) puts Nigeria’s consumption of petrol at 40 million litres daily. However, several industry analysts have put the nation’s actual consumption of petrol at 30 million to 35 million litres a day, claiming that the figure had been inflated due to the subsidy regime that encourages smuggling across Nigeria’s borders. The subsidy regime, notwithstanding, almost all of the country’s petroleum requirement for over a decade has been imported because of the suboptimal performance of the nation’s three refineries, which have the capacity to meet about 50 per cent of the country’s fuel demand. An official with one of the refineries informed THISDAY yesterday that with the commencement of operations of the Port Harcourt and Warri plants, Nigeria’s over-dependence on imported products would be drastically reduced.