₦airaland Forum

Looking at the document below, it's crystal clear that Dangote Refinery can boost Nigerian economy and bring down petroleum prices.

Right now he is buying a barrel of petrol at the equivalent of $72 per barrel (which is N117 Naira per barrel).

- each barrel produces 85 liters of petrol (which is about %53 of what comes out of a barrel of crude oil).

- When Dangote starts selling in Naira from the 1st of October, it will relieve the pressure on Naira by 40%. Because importation of petroleum products accounts for %40 of the Forex demand currently.

- when there is 40% less demand for Forex for importation, the Naira will strengthen to about N1000 to $1.

- that means Dangote will be using N72,000 to buy each barrel of crude oil as against the N117, 000 that he is using to buy each barrel right now.

- with that, the pump price will drop by about %40. (From N1000 per liter of petrol to N600 per liter of petrol).

- They stronger Naira will also help reduce the inflation that is biting Nigerians right now.

Toh

Let the countdown begin

We pray so

It currently costs them N65,622 to produce 85 liters of Petrol. When the exchange rate goes down to about N1000, it will cost much less to produce 85 liters of petrol from each barrel of crude oil.

Eteka1:
Looking at the document below, it's crystal clear that Dangote Refinery can boost Nigerian economy and bring down petroleum prices.

Right now he is buying a barrel of petrol at the equivalent of $72 per barrel (which is N117 Naira per barrel).

- each barrel produces 85 liters of petrol (which is about %53 of what comes out of a barrel of crude oil).

- When Dangote starts selling in Naira from the 1st of October, it will relieve the pressure on Naira by 40%. Because importation of petroleum products accounts for %40 of the Forex demand currently.

- when there is 40% less demand for Forex for importation, the Naira will strengthen to about N1000 to $1.

- that means Dangote will be using N72,000 to buy each barrel of crude oil as against the N117, 000 that he is using to buy each barrel right now.

- with that, the pump price will drop by about %40. (From N1000 per liter of petrol to N600 per liter of petrol).

- They stronger Naira will also help reduce the inflation that is biting Nigerians right now.

Although the simplistic economic theories and calculations you put up here hardly ever works smoothly Nigeria, I still agree with you 100% that there'd be an eventual reduction in petrol prices and an overall improvement in the economy IF Dangote refinery is allowed to operate efficiently.

But that's one very big 'IF'.

Quite possible. The pressure on the naira will surely reduce.

Stop trying to set up the government or Dangotte himself. Fuel (petrol) is not likely to reduce anytime soon.

Do not raise the hopes of people unnecessarily.

However, it will boost the economy of Nigeria in a lot of ways.

9jatriot:
Stop trying to set up the government or Dangotte himself. Fuel (petrol) is not likely to reduce anytime soon.

Do not raise the hopes of people unnecessarily.

However, it will boost the economy of Nigeria in a lot of ways.

It is far more likely to reduce than go up. Stop spreading anxiety by predicting gloom and doom all the time.

All the analysis are on point.

You nailed it perfectly.

,,,,,,

9jatriot:
Stop trying to set up the government or Dangotte himself. Fuel (petrol) is not likely to reduce anytime soon.

Do not raise the hopes of people unnecessarily.

However, it will boost the economy of Nigeria in a lot of ways.

The CBN has said that 40% of Forex demand is for petroleum products. If that 40% pressure will be removed, resulting in a stronger Naira. Then Dangote will need less Naira to buy a barrel of crude. This will translate to lower production cost per liter of petrol and other refined petroleum products. Therefore the pump prices will be lower. The inflation will reduce.

I understood where your logic is from but do this small analysis with me. Remember when USD to naira was around 750, petrol was around 600 and did not change even when exchange rate went up to 1600. That should tell you that the real rate of fuel is around 90cent.
FG may have been paying and lent us the deficit of close to 1k for the exchange rate.

If the pressure on naira reduces, even using this your 40%, that will take the exchange rate to around 1k to 1k2, so using that to calculate, you will find that it will be playing around 900 to 1050. Which is not too far from what our neighboring countries are paying.

It is always better to manage one's expectations so that you do not get disappointed if it does not become 300 naira as many wish for.

Eteka1:
The CBN has said that 40% of Forex demand is for petroleum products. If that 40% pressure will be removed, resulting in a stronger Naira. Then Dangote will need less Naira to buy a barrel of crude. This will translate to lower production cost per liter of petrol and other refined petroleum products. Therefore the pump prices will be lower. The inflation will reduce.

Awesome!