- The Federal Executive Council (FEC) has approved the sale of crude oil to Dangote Refinery and other domestic refineries in naira
- It said with the decision, Nigeria will save an annual $7.9 billion spent on fuel imports
- The decision is expected to settle the recent debacle between Dangote Refinery, the NNPCL and NMPDRA over crude supply
With the approval to sell crude oil to Dangote Refinery and other domestic refineries in naira, the Federal Government hopes to save $7.92 billion annually and reduce foreign exchange pressure.
The approval for the naira sale of crude oil among domestic refineries was given on Monday, July 29, by the Federal Executive Council (FEC) and takes immediate effect.
According to Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS), the approval to use the Dangote Refinery as a pilot for six months is to meet the country’s 450,000 barrels of domestic consumption.
Adedeji added that Nigeria spends between 30 and 40 per cent of its FX, about $660 million weekly and $7.92 billion yearly, on importation of Premium Motor Spirit (PMS).
He added that payment settlement between the Nigeria National Petroleum Company Limited (NNPCL) and Dangote Refinery will be handled by Afreximbank.
Decision will stabilise fuel pump price, make the economy predictable – FG
Given the rising pump price of fuel, which rose from an average of N238.11 per litre in May 2023 to N750 per litre as of June 2024, the announcement is a relief for consumers.
The FIRS boss said the move will stabilise the pump price of fuel, make the market predictable and reliable, eliminate the need for international letters of credit and save the country some FX.
He said President Bola Tinubu “has approved, through the Council, that effective immediately, that NNPC get engaged with local refineries and we are starting that with Dangote Refinery, that the sales of crude oil to Dangote Refinery be denominated in naira and also the sales of byproducts from Dangote Refinery to distributors also be conducted in naira.
“And what does it mean to our economy? One, the pressure on foreign exchange will be reduced.
“With this approval today through FEC, led by Mr President, this has been reduced by a minimum of 90 per cent. Because what we have today, the transaction will now be done in our local currency not only to Dangote Refinery but to all local refineries for all our local consumption and this will actually stabilise the pump price.
“This will also make economic stability a reality because they will no longer rely on the fluctuation in forex.
“In terms of benefits, one, which is major, is the reduction in foreign exchange pressure. We utilise $660 million per month, totalling $7.92 billion annually. With the new approval that we have, this will reduce to a maximum of $50 million per month which is annualised to be only $600 million. This is a total reduction of 94 per cent and saving us $7.32 billion.
“This will also reduce finance costs, which today stands at $79 million. When you consider opening letters of credit between those local refineries and what happens?
“And also, the Council has approved the settling bank to be Afreximbank. It will be the lead arranger between NNPC and Dangote Refinery.”
Will this end recent Dangote-NNPCL debacle over crude oil supply?
In the last few weeks, the Chairman of Dangote Group, Alhaji Aliko Dangote, the NNPCL and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) have been embroiled in a war of words over crude oil supply to the $20 billion refinery.
Dangote had accused International Oil Companies (IOCs) of frustrating the 650,000 barrels per day refinery’s efforts to secure adequate crude to meet its production capacity through price manipulation, necessitating it to source crude from the international market at a much higher cost.
However, both the NNPCL and NMDPRA have denied the accusations from Dangote, including that of owning a blending plant in Malta.
In order to end the crude supply dispute between local refiners and IOCs, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) struck a deal with the refiners, under the aegis of Oil Producers Trade Section (OPTS) to ensure adequate oil supply.
NUPRC’s CEO, Gbenga Komolafe, said the commission doesn’t condone “crude supply profiteering” and that it “will never allow price strangulation to disincentivise our domestic refining capacity optimisation.”
African giant: Nigeria wins bid to host $5bn African Energy Bank
Meanwhile, TheRadar reported that Nigeria’s $100 million investment in the African Energy Bank (AEB) has paid off as it won the hosting rights for the $5 billion bank, following a keen competition against countries like Ghana, Benin, Algeria, South Africa and Cote d’Ivoire.
The AEB is a partnership between Afreximbank and the African Petroleum Producers Organisation (APPO), the umbrella body of oil-producing nations in Africa. It is focused on investments in oil and gas projects across Africa, including energy transitions and 2060 net zero commitments.
