IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 8 NO. 5 2023
DOI: 10.56201/ijefm.v8.no5.2023.pg43.71

---

Economic Analysis of the Potential benefits to Nigeria of the new Dangote Oil refinery

Yusuf Usman Ahmed, Muhammad Usman

---

Abstract

Nigeria is among the largest oil producers and consumers in the world. The lack of sufficient domestic refining capacity necessitated the country to rely on the import of petroleum products. Adequate domestic refining capacity can substitute the import, improve its deficit balance of payment (BOP), add value to GDP, strengthen Naira, etc. Fortunately, a Dangote refinery with a projected refining capacity of 650,000 barrels per day is under construction in the country and is expected to begin operation in 2023. This study sourced time series data from the period 1995 to 2020 on Nigeria’s total balance of trade (proxy of BOP), Oil import, and GDP to forecast their future values until the year 2040 without the refinery’s contribution using the conventional Econometric Methodologies. Furthermore, Sensitivity Analysis along with the Monte Carlo Simulation was used in forecasting the refinery’s output, input, output price, and input price values between 2020 to 2040, those values were used in estimating the refinery’s contribution to Nigerian BOP and GDP. Findings reveal that without the refinery, Nigeria’s BOP deficit will escalate. Conversely, the refinery’s output will satisfy local demand and export surplus, and GDP will be enhanced by the refinery’s value added. However, the colossal refinery might abuse the dominant market position if the government failed to create an enabling environment for competition.

keywords:

Dangote, Refinery, Nigeria, Petroleum

---

References:

Anyanechi, C. (2021). Petroleum Industry Bill (PIB) 2021 - A gamechanger ? KPMG
Nigeria. https://www.mondaq.com/nigeria/oil-gas electricity/1102580/petroleum-
industry-bill-pib-2021--a-game-changer-
Baur, S. (2014). Overcoming the resource curse through innovation: The case of the
petroleum industry in Nigeria. Resources Policy, 39, 169-178.
BP. (2021). BP Statistical Review of World Energy 2021. Retrieved from
https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-
economics/statistical-review/bp-stats-review-2021-full-report.pdf
Brooks, C. (2008). Introductory econometrics for finance (2nd ed.). Cambridge University
Press.Countries. International Journal of Academic Research in Business and Social
Sciences, 9(2), 92-103.
Omoregie, U. (2019) ‘Nigeria’s Petroleum Sector and GDP: The Missing Oil Refining Link’,
Journal of Advances in Economics and Finance, 4(1). Available at:
https://doi.org/10.22606/JAEF.2019.41001.
Pesaran, M.H. (2016) ‘Introduction to Dynamic Economic Modelling’, in Time Series and
Panel
Data Econometrics. Oxford University Press, pp. 120–135. Available at:
https://doi.org/10.1093/acprof:oso/9780198736912.003.0006.
Refineries and Petrochemicals. (n.d.). Nigerian National Petroleum Corporation. Retrieved
from https://nnpcgroup.com/Pages/Refineries.html
Todaro, M. P. (1992). Economic Development in the Third World. Longman.
Pearce, R. (1992). Import Substitution and Export-Led Growth Revisited. The Journal of
Development Studies, 28(2), 236-254. https://doi.org/10.1080/00220389208422248
Todaro, M.P. (1992) ‘Economics for a developing world: an introduction to principles,
problems and policies for development’, p. 1992. Available at:
https://books.google.com/books/about/Economics_for_a_Developing_World.html?id
=j6GbQgAACAAJ
(Accessed: 22 July 2022).
Zainodin, H.J. and Yap, S.J. (2013) ‘Overcoming multicollinearity in multiple regression using
correlation coefficient’, in AIP Conference Proceedings. American Institute of
PhysicsAIP, pp. 416–419. Available at: https://doi.org/10.1063/1.4823947

DOWNLOAD PDF

---

Back