Why NNPC’s 20% Stake In Dangote’s Refinery Is Good For Nigeria’s Economy

The proposal by NNPC to take 20% equity stake in the Dangote Refinery is a move in the right direction. The reality is that the Dangote refinery is a project of significant, and strategic national importance, even though it is promoted by the private sector.

Taking a stake in the project also makes a great deal of economic sense, especially given our heavy dependence on importation of petroleum products and the resultant pressure on our foreign reserves.

It is a project that has a good prospect of putting an end to fuel importation and the associated leakages of public funds. It would also ensure the preservation of our foreign reserves as we currently spend billions of dollars annually on importation of petroleum products.

This is in addition to the several multiplier effects arising from related spin off industries like petrochemicals and fertilizers plants. These resonate well with our aspiration for self-reliance and backward integration.

The export prospects are also quite bright and the job creation outcomes are quite positive and considerable. It is also important to reckon with the fact that this is perhaps the biggest indigenous enterprise in the country’s history. And the outlook is positive.

Another exciting thing about this investment proposition is that NNPC will be a minority shareholder and would therefore not be responsible for the management of the refinery. However, It is important that the investment process is in line with best practices of due diligence and transparency.

The undoing of our public enterprises has been the quality of management. As a country, we have paid a huge price for this in the form of inefficiency, corruption, wastages and many more.

The model being proposed with the Dangote refinery is similar in a way to the Nigeria Liquified Natural Gas model which remains one of the best examples of how government funds should be invested in a private enterprise.

It is a model that shields the enterprise from interference by politicians and bureaucrats. The outcomes have been very impressive. Mismanagement and political interference are the biggest risks to public enterprises.

This proposition is much better than the decision to commit scarce public funds to the rehabilitation of government owned refineries. Privatization of those refineries in their current state would have been better.

Dr. Muda Yusuf is an Economist and the immediate past Director General, Lagos Chamber of Commerce and Industry.