Nigeria’s economic pulse: Dangote refinery, naira crude sales, and AI innovations

Welcome to 234Digest Daily Briefs! I am Samuel Okocha, the curator and editor of this newsletter. Last week, we transitioned from a weekly to a daily brief, bringing you updates from Tuesday to Friday, with a deep dive on Sundays. It’s almost 12:30 PM as I hit send on this newsletter, and I’m happy to keep the momentum going. Today’s edition is a special combo, covering both our Sunday deep dive and Tuesday’s snapshot to make up for the missed Sunday edition. I appreciate your understanding and remain committed to keeping things moving with insightful and timely news.

Today’s briefs

Dangote refinery to transform Nigeria’s oil market

The Dangote oil refinery is set to take in up to 400,000 barrels of Nigerian crude daily over the next two months, marking a significant shift in the region’s import and export dynamics. The refinery, located outside Lagos, will receive approximately 24 million barrels of Nigerian crude in October and November, according to Bloomberg News. This move will drastically reduce Nigeria’s crude exports as the 650,000-barrel-a-day plant ramps up operations, claiming 13 to 14 shipments from Nigeria’s typical monthly programme of about 50 cargoes. Despite some potential delays, this volume is a substantial increase from the average 255,000 barrels a day processed in the first half of the year.

Nigerian crude sales in naira begin

In a bid to reduce petrol costs, Nigeria has commenced the sale of crude oil in naira as of October 1. Finance Minister Wale Edun announced that President Bola Tinubu directed the sales to Dangote and other refiners in naira to mitigate the dollar’s impact on petrol prices. This initiative aims to provide financial relief to Nigerians by eliminating the dollar effect on fuel costs.

Economic boost from Dangote refinery

A report by Analysts Data Services and Resources (ADSR) Limited projects that the Dangote refinery could elevate Nigeria’s economy to $484.15 billion within six years if it operates optimally. The 650,000 barrels per day facility is expected to boost Nigeria’s GDP growth from 4.15% by the end of 2024 to 6.21% by 2030. Without the refinery, GDP growth is forecasted to be 3.34% in 2024, rising to 4.13% by 2030. More details can be found in the ADSR Limited Report.

IOM funds flood relief efforts

Meanwhile, the International Organisation for Migration (IOM) has allocated $1.8 million to assist those affected by severe flooding across Nigeria. This funding will support over 180,000 people in Borno, Benue, Adamawa, and Yobe States, providing emergency humanitarian aid including shelter, non-food items, cash assistance, protection, and water, sanitation, and hygiene services. IOM Nigeria’s Chief of Mission ad interim, Paola Pace, emphasized the urgency of delivering immediate relief to the displaced communities. More information is available on the IOM Nigeria website.

Nigeria AI Collective launched

On a different note, the government formally launched the Nigeria AI Collective on Monday in Abuja. This community of practice unites experts from civil society, academia, technology, and other sectors to advance Artificial Intelligence in Nigeria and ensure its safe and ethical use. The Collective’s objectives include knowledge sharing, policy advocacy, innovation and research, capacity building, and international collaboration. “The Nigeria AI Collective reflects our unique and inclusive ecosystem approach towards developing and deploying AI in Nigeria for the greater good. It sets a standard for other countries looking to build capacity in AI for transformational change,” said Bosun Tijan, Minister of Communications and Digital Economy, in a LinkedIn post.

Deeper dive: Nigeria’s crude oil sales in naira

Why it matters: Nigeria’s decision to sell crude oil in naira to Dangote and local refiners could reshape its economy and influence global oil markets. This policy aims to stabilize fuel prices and reduce the economic strain from dollar volatility.

Driving the news: As of October 1, Nigeria began selling crude oil in naira. Finance Minister Wale Edun announced that President Bola Tinubu directed these sales to mitigate the dollar’s impact on petrol prices, providing financial relief to Nigerians.

The big picture:

This policy represents a bold attempt to address Nigeria's economic challenges, but it comes with both opportunities and risks:

• Economic impact: Selling crude in naira could lower petrol costs and stabilize the economy. The initiative could save Nigeria $7.32 billion annually and reduce monthly forex expenditure on petroleum products from $660 million to $50 million. However, the naira’s depreciation and inflation risks pose significant challenges.

• Global market dynamics: Nigeria’s bold move aligns a global trend of countries seeking alternatives to the US dollar for international trade, potentially influencing other oil producing countries. This could lead to a more diversified oil market but may also disrupt international trade agreements.

• Policy and implementation: Effective implementation requires clear guidelines and collaboration with major oil companies. The policy’s success hinges on gaining support from local and international stakeholders and managing risks such as currency depreciation and inflation.

The bottom line: Nigeria’s crude oil sales in naira to Dangote and local refiners represent a bold economic strategy with far-reaching implications. Its success or failure will provide critical insights into the viability of reducing dollar dependence in global oil markets.

Quote of the day: “Success is not final, failure is not fatal: It is the courage to continue that counts.” – Winston Churchill

And that’s a wrap. Thank you for joining me in this special combined edition of 234Digest Daily Briefs. Stay tuned for more updates and in-depth analyses in upcoming editions, including Sundays for an expanded edition with deeper dives on key stories. If you’re new here, consider subscribing to get your daily dose of Nigeria’s economic and business news straight to your inbox. Your support keeps things going, and I look forward to bringing you more insightful content.