By Chibisi Ohakah, Abuja
Centre for the Promotion of Private Enterprise (CPPE), an economic advocacy group, has identified Dangote Petroleum Refinery in Nigeria as one that would impact positively on the downstream sector, and as well drive growth in the Nigerian economy in 2022.
In a Nigeria Economic Outlook for 2022 released by the CPPE, its chief executive officer, Dr. Muda Yusuf said an activation of the Petroleum Industry Act (PIA) in 2022 is expected to impact positively on the economic outlook.
“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 added.
He said the average oil price in 2022 is expected to exceed the budgeted benchmark of sixty-two dollars ($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 reserve and strengthen the capacity of the Central Bank of Nigeria (CBN) to support the foreign exchange market”, Yusuf said, adding that if the Dangote refinery comes on stream in 2022, the fiscal pressure on the economy may abate, but not completely eliminated.
According to the economist, because the service sector is less vulnerable to the structural constraints of the economy, especially the real sector of the economy, it will continue to outpace the real sector in 2022.
“The service sector of the Nigerian economy will continue to outpace the real sector in 2022. In the third quarter of 2021, service sector contribution to GDP was 50% and the growth of the sector was 8.41%. Oil sector contribution to GDP was 7.5% while the non-oil sector contribution was 92.5%, while the industrial sector growth contracted by 1.63%, agriculture grew by 1.2%.”
Yusuf said the Gross Domestic Product (GDP) growth would remain fragile at about three per cent, pointing out that the key expected drivers of growth would be sustained recovery of global oil price.
“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,” he said.
The economist noted that despite the downside risks, the economy would 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.
In another instance, the Financial Derivatives Company Limited, a financial institution, in its Economic Report for 2022, expressed firm belief that the Lagos Nigeria based refinery will boost the growth of the downstream sector of the economy and enhance petroleum products distribution across Africa.
The chief executive officer of the institution, Mr. Bismarck Rewane, however warned that the refinery, when operational, the refinery would be a means to an end.
“The coming on stream of Dangote Refinery will no doubt enhance product distribution across Africa. But will the 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.
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