Lifting petrol from Dangote refinery will ease pressure on the economy – Cardoso

Yemi Cardoso, the governor of the Central Bank of Nigeria (CBN) has described the Dangote Refineries as a game changer, capable of turning around Nigeria’s dollar-starved economy.

Cardoso stated that lifting petrol from the $20 billion refinery would ease FX pressure and the effect will spiral into an economy battling dollar shortages.

The CBN governor disclosed this on Tuesday in Abuja, while presenting a communique from the apex bank’s 297th Monetary Policy Committee meeting.

He stated that getting petroleum products from Dangote would also moderate transportation cost, thereby easing food prices that are soaring and triggering a cost of living crisis.

“The committee expressed optimism that the lifting of refined petroleum products from Dangote refinery will moderate transportation costs and significantly support the easing of food price pressures in the short to medium term,” Cardoso said.

“This is also expected to moderate foreign exchange demand for importation of refined petroleum products, with a positive spillover on external reserve and improvement in the overall balance of payment position,” he added.

According to the CBN governor, an assessment of the performance of Nigeria’s financial institutions indicated that they were stable “in spite of familiar headwinds”.

Flood, petrol scarcity threatens food prices

The increasing cases of flooding, especially in food-growing regions together with rising energy prices and lingering petrol scarcity, remains great threat to food inflation, Cardoso said.

He also said insecurity in farming communities remained upside risks to achieving lower food prices which has just declined for two straight months after rising for almost two years.

Cardoso said that, considering the weight of food in the Consumer Price Index (CPI) basket, the MPC recognised the efforts of the Federal Government in addressing insecurity in farming communities.

“In addition, the MPC applauded the ongoing effort of the Federal Government to bridge the food supply deficit through the duty-free import window for food commodities,” he said.

In an attempt to rein in the stubbornly high inflation together and stem the likely passthrough effect of the recent hike in pump prices, the Cardoso-led MPC has again raised the benchmark interest rates to 27.25 percent.

This marks the fifth straight increase in less than a year, raising the rate by a cumulative 850 basis points even as inflation slows to 32.15 percent in August 2024.

In addition to the MPR hike, the CBN also raised the Cash Reserve Ratio (CRR) for commercial banks by 500 basis points to 50 percent, up from 45 percent.

Merchant banks saw a smaller increase, with their CRR raised by 200 basis points to 16 percent, up from 14 percent.

The CBN however retained the asymmetric corridor around the MPR at +500/-100 basis points, while keeping the liquidity ratio unchanged at 30 percent.