President Bola Tinubu has directed the Nigerian National Petroleum Company (NNPC) to sell crude oil to the Dangote Petroleum Refinery and other domestic refineries in naira. This decision, announced on Monday, aims to stabilize fuel prices and the dollar-naira exchange rate.
The new policy is expected to significantly impact the domestic oil sector, with oil marketers and experts predicting a crash in the prices of refined petroleum products. The move will also help boost the output of local refineries, enhance the country’s foreign exchange reserves, and strengthen the naira.
Special Adviser to the President on Information and Publicity, Bayo Onanuga, confirmed that the Federal Executive Council (FEC) adopted the policy to stabilize fuel prices and the exchange rate. The decision involves selling 450,000 barrels of crude meant for domestic consumption in naira, with Dangote’s refinery used as a pilot.
The policy is anticipated to reduce Nigeria’s forex burden, with savings projected at $7.3 billion annually. The President’s Special Adviser on Revenue, Zacch Adedeji, noted that the new system could cut monthly forex expenditures on petroleum products from $660 million to $50 million.
Oil marketers and operators of modular refineries have welcomed the initiative, praising it as a significant development for Nigeria’s oil sector. Chief Ukadike Chinedu of the Independent Petroleum Marketers Association of Nigeria and Eche Idoko of the Crude Oil Refiners Association of Nigeria both highlighted the potential for lower fuel costs and strengthened local currency.
However, some concerns remain. Professor Dayo Ayoade of the University of Lagos emphasized the need for the government to ensure that crude oil meant for local consumption is not used to settle past loans. Meanwhile, Dangote refinery has reported ongoing challenges in securing crude oil, alleging that International Oil Companies (IOCs) have been frustrating local efforts by offering crude at higher prices and prioritizing sales to Asian markets.
The new policy, which includes the facilitation of transactions by Afreximbank and other settlement banks, aims to eliminate the need for international letters of credit and streamline the supply chain for domestic refineries.
As the initiative progresses, further details and implementation steps are expected to be revealed.
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