The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, has said that Dangote Refinery’s petroleum product production will boost the strength of the naira, Nigeria’s legal tender.
Oyedele disclosed this on Wednesday during a stakeholder session for tax consultants and chief financial officers (CFOs) on the PFPTRC’s proposed tax bills, virtually monitored by Nairametrics.
The bills are currently before the National Assembly for scrutiny.
Positive Indicators on Nigeria’s Economic Landscape amid Tax Reforms
Oyedele explained that the ongoing tax reforms are happening when there are positive indicators in the country’s economic landscape.
- He said that crude oil production is rising, with the latest reports indicating the country produces about 1.8 million barrels per day.
- Citing Dangote Refinery, he stressed that the nation has commenced local refining of crude oil, adding that Nigerians should not worry about the “drama” surrounding the refinery’s production and distribution capacity.
- He stressed that information at the disposal of the committee shows that Dangote Refinery produces enough to meet domestic consumption.
He explained that, based on this development, the local refinery’s products will flood the market, strengthen the naira, and make the nation a key exporter of refined crude oil products.
“We like drama, so don’t worry about the back and forth.
“The fundamental point is that now we are refining our products, and the information we have even suggests that Dangote alone is now producing more than we can consume. This means our local refining will wet the market, and we can also export.
“So, that’s not only good news for the availability of the product but also for the strength of the naira. That’s the biggest demand on our FX regime,” he said.
More Insights
Oyedele further noted that the repayment of Ways and Means is also good news for the country.
- However, he stressed that Ways and Means, which implies government printing money, negatively affects the poor.
- He said that when the government simply prints money to spend, it is a way of collecting taxes without legislation.
- He said the problem with printing money to spend is that this affects everyone but disproportionately impacts the poorest people, as they don’t have assets that can preserve the value against inflation.
- He highlighted that this development is a “potential crisis waiting to happen” if the government continues down this path.
“When you depress your vulnerable citizens even more, they wake up feeling hopeless. At that point, they cannot be rational. Then you are surprised when people engage in hunger protests and you don’t understand what they are doing in the north. You’re not supposed to understand their actions because they are not being rational.
“You know, when the government prints money to spend, you don’t see people going on the streets to protest, because they haven’t come to you to ask for money. If they printed 40 trillion Naira without a corresponding increase in economic output, and if that 40 trillion Naira represented 20% of our GDP, it means that the N1000 you have in your pocket, in your wallet, or in your bank account is now worth only N800. The government has just taken 20% from your money without legislation,” he added.
He further noted that this situation is why Nigerians cannot continue to say they will not pay taxes.
“We’re not justifying anything, but we’re simply acknowledging the situation in which we find ourselves.
“But we are repaying back those Ways and Means, so that’s good news,” he added.
He highlighted other positive indicators, including positive outlooks by rating agencies, capital market performance, and improvements in capital inflows.
However, he added that several areas of the economy are still a work-in-progress, including exchange rate recovery, convergence, stability, high inflation, and the cost of doing business.
What You Should Know
Oyedele’s remarks on Dangote Refinery come as Aliko Dangote recently addressed what he called the “absurd” reality of Africa’s largest oil producer relying on imported refined petroleum due to insufficient domestic refining capacity.
- The refinery, touted as Nigeria’s most significant infrastructure project in decades and the largest single-train refinery globally, began producing jet fuel and naphtha earlier this year, with petrol production commencing in September.
- It is currently operating at 420,000 barrels per day, and Dangote has stated that he expects it to hit full capacity by the second quarter of next year.
- The refinery is currently selling petrol to local marketers as well as NNPC, a move that has significantly reduced the country’s reliance on fuel importation.
- Recall that Dangote Petroleum Refinery and Petrochemicals FZE had also asked the Federal High Court in Abuja to void import licenses issued to the Nigeria National Petroleum Corporation Limited (NNPC), Matrix Petroleum Services Limited, A. A. Rano Limited, and four other companies for the purpose of importing refined petroleum products that are already being produced by Dangote without shortfalls.
That matter is still pending even as some of the defendants have asked the court not to void their import licenses. However, Dangote Refinery later disclosed it would withdraw the case by January 2025.
