Dangote Petrochemical Plant is expected to boost Nigeria’s non-oil export earnings, with the announcement last week that it will start producing polypropylene, a petrochemical by-product that is highly sought after by players in the global manufacturing, automotive, healthcare and food packaging industries.
The global polypropylene market is worth $130.19 billion, representing 22.45 percent of the world’s $580 billion petrochemicals market.
The industrial materials will be produced by the $2 billion petrochemical plant located within the Dangote Refinery Complex in Ibeju-Lekki, Lagos State, Nigeria’s commercial capital.
While making the announcement in Lagos last week, Devakumar Edwin, group executive director, strategy, capital projects and portfolio development, Dangote Industries Limited, said the petrochemical plant would produce 77 different high-performance grades of polypropylene in Nigeria.
He said: “The Dangote Petrochemical Plant is being built alongside the refinery. Primarily, the plant is going to produce polypropylene products. We have 77 types of polypropylene, which can go for different usages that we can produce from our petrochemical plant.
“Currently, the plant is capable of producing about 900,000 tonnes of polypropylene per annum. Our petrochemical plant should be the biggest in Africa.”
The announcement was well received by players in the nation’s manufacturing industry who have been having difficulty sourcing foreign exchange to import raw materials in the last two years due to the illiquidity in the forex market.
According to some of them, the announcement implies that local producers will get polypropylene with ease, a development that will save them from the challenges of FX volatility and market illiquidity.
The announcement also came at a time the dire straits of Nigeria’s fiscal status were revealed by Zainab Ahmed, minister of finance, budget and national planning, who declared that the country realised just N1.23 trillion revenues in the first four months of 2022, compared to an expenditure of N4.72 trillion.
For almost a decade, non-oil exports have been tipped to enhance the government’s fiscal position as a manifestation of the diversification drive. However, this dream has not materialised. Not only did the federal government end up incurring a deficit of N3.09 trillion between January and April 2022 because of its inability to generate the targeted revenue from oil and non-oil exports, the pressure was too much on the naira, which depreciated against major international currencies due to market illiquidity.
Nigeria’s non-oil exports, when expressed as a percentage of total exports, averaged 10 percent on a monthly basis from January 2018 to March 2022. This implies that out of every $1,000 monthly foreign earnings realised by Nigeria during the period, non-oil exports brought in $100 monthly.
The country has not been able to benefit from the global crude oil price rally due to crude oil theft, subsidy payment, and debt servicing.
According to some stakeholders, the Dangote Petrochemical Plant will be adding to the list of semi-manufactured non-oil export products.
“It is a welcome development and positive news for Nigeria. Hitherto, when the Warri Refinery and Petrochemicals Plant was up and fully functional, Dangote Petrochemical Plant would have complemented their production. We need to earn foreign exchange to boost reserves and strengthen our currency,” Ade Adefeko, chairman, export group of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture.
Available data showed that the global market size for polypropylene was projected to grow on the average from $96.46 billion in 2020 to $130.19 billion in 2028, according to projections by Grandview Research, Future Market Insights, and Fortune Insights.
As of 2018, trade in polypropylene was worth $27.5 billion, representing 0.14 percent of the global total trade, according to the Observatory Economic Complexities (OEC).
Saudi Arabia topped the export chart as it sold $5.94 billion worth of polypropylene materials to its foreign customers. It was followed by South Korea, $2.39 billion; Germany, $1.77 billion, Belgium, $1.75 billion, and the United States, $1.62 billion.
China topped the importers’ chart with $3.47 billion worth of polypropylene materials. It was followed by Turkey, $2.07 billion; Italy, $1.31 billion; Germany, $1.23 billion, and Vietnam, $1.15 billion.
Eighteen African countries traded in polypropylene as of 2018, according to OEC. Their import and export trade values amounted to $2.49 billion. The top five countries were Egypt, South Africa, Nigeria, Kenya and Morocco.
But in terms of the trade deficit in polypropylene, Nigeria topped with about $300 million or N128 billion. It was followed by Morocco and Kenya, $170 million each; Tanzania, $87 million; Egypt, $64 million; Cote d’Ivoire, $64 million; and Ghana, $50 million, all as of 2018.
“Foreign exchange volatility is giving many local producers challenges in importing polypropylene materials. Nigeria is in this situation because our refineries are not working. Mind you, we have very good professionals who can produce polypropylene that will be of global standards in Nigeria,” Adewale Olalekan, a chemical engineer, said.