July 21, 2024

 Expert urges Nigerian Government to prioritize local refineries amidst foreign exchange volatility

 Expert urges Nigerian Government to prioritize local refineries amidst foreign exchange volatility

Oredola Adeola


Dr. Boniface Chizea, Chief Executive Officer of BIC Consultancy Services, has urged the Nigerian government to prioritize productivity by either leveraging the operations of the Dangote Refinery or focusing on getting the local refineries up and running, while also taking decisive action to address the economic challenges caused by foreign exchange volatility in the shortest possible time.


Dr. Chizea made this known in a statement he shared with EnergyDay on Sunday.


According to him, it was time to, as a Nation, wake up to reality; to wake up and smell the coffee, there is the need for urgent steps to be taken to stem the hemorrhage in the economy.


He emphasised that the country’s economy is in a double whammy of the add-on negative effect due to the removal of the Petroleum subsidy. He noted that there is no country in the world I know of where such matters are left entirely to the market, never mind the Nigerian economy.


He said, “Until the President took up the gauntlet with the announcements that there will be no more hike in the pump price of fuel, and I suppose we should expect that there must be a benchmark target for the rate of exchange of the Naira.


“It does not matter for now whether we are going to be able to sustain these developments. That is an issue we would have to address as matters unfold. Saying the obvious, if we don’t secure today, there will be no tomorrow to worry about.


” I had cautioned severally that there is no market for dollars in Nigeria. What sort of market is that with only one major source of dollar inflow into the economy? And even this source it will appear has had its days under the sun.


“As of today, we are not able to meet our OPEC quota of about 1.6 million barrels a day (mbd) but rather struggling to produce just over one million barrels a day due to rapid and rampant theft and other leakages due to operational issues.


“Meanwhile the demand for dollars in the economy is insatiable. If you float the currency, there is only one predictable outcome just as we are now witnessing as it has always been safe to take a bet on the movement of rates in the country.


“You don’t also remove subsidy as we just did because it will impact the inflationary spiral. There is nothing that has such a devastating potential as an increase in the pump price of fuel. The velocity at which such increases transmit through the economy is unbelievable.


“What we needed to do was to tackle the root causes of our dilemma which essentially is lack of productivity. If we stopped fuel importation today, we would be reducing demand pressure on the dollar to the extent of at least 30%.


“In the interim, there is the need to mobilize all forces to hasten the commencement of operations by Dangote Refinery. That represents low-hanging fruits that we must not allow to go begging for a prolonged duration. We must either get the local Refineries operational in the shortest possible time or quickly privatize them.


“We must brace up to mobilize alternative sources of energy in place of petrol such as Condensed Natural Gas and Electric Cars which we have been informed that Lagos State is already experimenting with.


” It is about time steps are taken to officially source foreign exchange inflow from solid minerals, by stepping into such areas instead of leaving them to be exploited by unauthorized non-State actors.


Dr.  Chizea, therefore emphasised that floating the Naira will not attract investors to Nigeria due to the mismanagement of the economy. He added the recent removal of petroleum subsidies was a double whammy that compounded the issue.


According to him, due to forex volatility and rising cost of energy several companies, including Nestle Nigeria, Guinness, and Nigerian Breweries, have experienced downturns in their operations due to recent policy measures.


He said, “An estimate indicated that about 50 manufacturing Nigerian companies shut down in the last five years, and 20 shipping companies left Nigeria on account of low business. NACCIMA reckons that about 800 companies have shut down in the last three years.


“An inflationary spiral at over 24% is unprecedented. We have not had inflation at such a high rate in Nigeria for the past 22 years. The fact is that for a long time, we targeted single-digit inflation and specifically aimed for an inflation rate within the range of 6-9%.


“But at the rate we now experience prices now change frequently and if we are not careful we might have the Venezuela scenario on our shores where the value of the currency is so devastated that it is almost worthless.


Already we are beginning to experience unusual scarcity in our shops and this is only the tip of the iceberg. It is morning yet if we are not careful.

He also expressed concerns that it is unusual for the Nigerian National Petroleum Company Limited (NNPCL) to negotiate a $3 billion loan from AfreximBank to be disbursed in tranches and to be repaid with oil proceeds.


This duty, according to him, is typically the responsibility of the Central Bank.


Dr. Chizea further warned that if the rut is not stopped, and productivity enhanced locally, Nigeria risks reaping a ghost land.


He said that Nigeria has a large population of over 200 million people to say the obvious and there is therefore the need for studied caution.


“Already the rate at which citizens are seeking for greener pastures overseas is alarming and must not be allowed to continue. Dare we add that President Tinubu must be mindful and equally concerned about the judgment of history,” Dr. Chizea said.