Dangote refinery alleviates forex strain, brings stability to naira, says Afreximbank

George Elombi, President and Chairman of the Board of Directors of the African Export-Import Bank, has acknowledged the pivotal role of the Dangote Petroleum Refinery in stabilising the naira by reducing Nigeria's reliance on imported petroleum products.

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Elombi made this disclosure during a Mid-Year Media Roundtable with journalists in Abuja on Wednesday, where he also revealed that Afreximbank had allocated $2.5bn towards the refinery's expansion, while defending the bank's development financing strategy across Africa.

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The refinery, according to Elombi, has already demonstrated its strategic importance during the recent Middle East tensions, when disruptions in the Gulf failed to create shortages of refined petroleum products across Africa, as "the crisis in the Gulf has happened; oil prices fled, but Africa didn’t lack in its refined petroleum products".

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Elombi further explained that the refinery helped ease pressure on Nigeria's foreign exchange market by reducing fuel imports and enabling crude-for-naira transactions, which ultimately stabilised the currency, as "it wasn’t believed, but the currency stabilised because of that".

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The Dangote Petroleum Refinery is viewed by Elombi as an investment whose benefits extend beyond Nigeria, serving as a model for other African countries, and Afreximbank is supporting its expansion after approving $2.5bn out of the $4bn financing requested by the company.

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Afreximbank is also supporting refinery and storage infrastructure projects in Ethiopia, Kenya, Tanzania, Uganda, Angola, Chad, the Republic of Congo, and Namibia to strengthen Africa's energy security and reduce its vulnerability to external supply shocks.

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Furthermore, Elombi noted that the Dangote Group's fertiliser business has become a major export platform, shipping products to Germany, Brazil, and other markets, although Afreximbank wants a greater share of such exports directed to African countries to deepen intra-African trade.

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Nigeria is considered Afreximbank's largest and most strategic market, described by Elombi as "the heartbeat of the African continent, and Dangote is demonstrating that it is indeed the heartbeat of the continent", highlighting the significance of energy in driving economic activity.

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Elombi also highlighted the role of the Pan-African Payment and Settlement System in reducing pressure on foreign exchange markets, enabling the Dangote Group to swap its Ethiopian birr holdings with Ethiopian Airlines' naira balances, eliminating the need for both parties to source scarce foreign exchange.

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PAPSS currently connects more than 190 commercial banks and fintechs across 28 African countries, and is considered critical infrastructure for the African Continental Free Trade Area, with plans to introduce a payment card that would allow Africans to spend their local currencies across participating countries without first converting them into dollars.

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Although adoption has been slower than expected due to initial misunderstandings by central banks, Elombi said the platform is gaining momentum and attracting interest from global payment companies, with Afreximbank viewing stablecoins as complementary rather than competitive to PAPSS.

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Elombi reiterated the bank's shift towards financing value addition rather than the export of raw materials, citing the need for Africa to seize opportunities in electric vehicle battery production by processing its abundant mineral resources locally, stating "we’re no longer interested in anyone who is going to just mine Africa, we only want people who will mine and process at home".

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He also criticised global credit rating agencies for unfairly penalising African institutions due to negative perceptions of the continent, arguing that Afreximbank's loans are well collateralised and perform strongly despite operating in Africa.

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Such perceptions, according to Elombi, increase borrowing costs, discourage investment, and limit access to cheaper financing, and he challenged African journalists to tell more balanced stories about the continent by highlighting development successes alongside governance challenges.

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Elombi maintained that Afreximbank would continue deploying African capital to finance African development rather than parking funds abroad, stating "you cannot say there are no seaports, no power transmission lines and no manufacturing units, and then you take the money and keep it abroad".

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Despite concerns raised by some rating agencies, Afreximbank's shareholders have remained confident in the institution, with the bank continuing to finance governments and private sector projects across the continent, including a recent $2.5bn senior syndicated term loan for Dangote Petroleum Refinery and Petrochemicals.

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The Senior Executive Vice President of African Export-Import Bank, Mr Denys Denya, recently said the bank is financing three additional refineries in Nigeria as part of efforts to cut the country's dependence on imported petroleum products.