The principal reason why the Naira is depreciated is because our legal tender is now being floated. No longer are we wasting $1.5 billion a month artificially defending the Naira. The country’s currency is currently responding to the laws of demand and supply. This means that the more foreign goods and services Nigeria imports and the less of our own goods and services we export, the more the downward pressure on the Naira.
Now, what is Nigeria’s single biggest import? Fuel. We spend an average of $10 billion importing refined petroleum products. That is $10 billion that weakens the Naira and strengthens the Euro (because we primarily import fuel from Europe).
However, now that the Dangote Refinery, along with the revamped Port Harcourt Refinery, are poised to meet our local production needs in fuel and even surpass them, thereby making Nigeria a potential fuel exporter, that $10 billion pressure on the Naira will disappear.
The first impact of this will be that the Naira will stabilise, and then appreciate. That is how the Dangote Refinery will impact you.
Then, beyond that, the organised private sector, who used to rely on overpriced diesel to power their manufacturing plants and telecommunications masts and equipment, will now have access to made in Nigeria affordable diesel and aviation fuel. To stay competitive, they will have to reflect the reduced costs in their pricing. That means you, the consumer, will soon start paying slightly less for made-in-Nigeria goods and services.
Finally, the perennial fuel scarcity Nigeria faces now and then will become a thing of the past. This means that instead of wasting valuable man-hours in fuel stations, you can buy petrol and diesel at your convenience and go on your way to work. The immediate effect of this would be that our Gross Domestic Product will increase, which will reduce headline inflation and unemployment.
Reno Omokri @renoomokri
