40% of FOREX demand is used for petroleum product importation

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, yesterday blamed the continued fall in the value of the naira against other major currencies on the huge demand for foreign exchange (FOREX) necessitated by the importation of petroleum product into the country. According to the Minister, the sector account for between 30 and 40 per cent of foreign exchange demand, adding that the failure of the nation’s refineries to work optimally has led to shortfall in the availability of FOREX in the open market.

Speaking in Lagos yesterday, the minister painted a gloomy picture of the industry stating that proactive steps are required to bring Nigeria’s economy back on positive track.

He said, “We need to get our refineries to work optimally, in order to inject funds back to the economy. It is taking us four to six months to go through processes and bureaucracy even to get investors coming into the country and inject money to take the refinery to the point where it is needed.

“And the reality is that unless we do that, the dream and hope I had was that in 2018 we should begin to reduce drastically petroleum product import into the country and in 2019, we should be able to exceed total local demand, and so, if we can take care of that alone, the pressure on foreign exchange will reduce. The foreign exchange conversion rate, the exchange rate will improve in favour of the Naira.

On vandalism and the impact on the economy, he noted that between January and June 2016, over 1,600 incidents of vandalism was recorded resulting in a loss of 109 million liters of petroleum products and 560,000 barrels of crude oil to refineries.

”An additional 1.1 million barrels of oil per day is required to be produced between now and year end to meet targeted annual production.” He explained that compared to the 2.2 million barrels per day targeted in the budget, the country currently produces 1.56million barrel per day resulting in a shortfall of 700,000 barrels per day translating to 29 per cent fall. He further added that for the desired diversification of the nation’s economy to be successful, “the government will still have to depend on the petroleum sector to provide the required funds needed for the growth.”