Uncertainty surrounds Nigeria’s Naira-for-Crude Policy, which was set to start on October 1, 2024. However, as of that date, the federal government had not released the necessary guidelines.
On September 13, 2024, the Technical Sub-Committee on Domestic Sales of Crude Oil announced the approval to sell crude to local refineries in naira. Specifically, President Bola Tinubu’s Federal Executive Council endorsed this move, along with the purchase of petroleum products in the same currency. Ultimately, this initiative aims to reduce foreign exchange demand by 40% and stabilize the naira.
The Nigerian National Petroleum Company Limited (NNPC) planned to supply about 385,000 barrels per day (kbpd) of crude oil to the Dangote Refinery starting on October 1, with payments made in naira. In return, Dangote Refinery would sell refined products back to the NNPC in naira.
However, LEADERSHIP could not confirm whether the policy had started. Despite efforts, spokespeople for both Dangote Refinery and the NNPC did not respond to inquiries.
Nonetheless, Zacch Adedeji, chairman of the Technical Subcommittee and head of the Federal Inland Revenue Service (FIRS), reiterated that the supply would start as scheduled. Furthermore, Dare Adekanmbi, the Special Adviser on Media to the FIRS chairman, confirmed the plan for the refinery.
In addition, the federal government proposed a similar arrangement for the Port Harcourt Refinery, which missed its September rollout deadline due to technical issues. This situation frustrates Nigerians who hope for increased local petrol production as the Dangote Refinery prepares to operate.
The federal government prioritizes supplying naira-denominated crude oil to Dangote Refinery. As a result, this decision should enhance the domestic fuel supply chain and promote transparency. Indeed, oil transactions in Nigeria typically occur in U.S. dollars.
The Federal Executive Council recently allowed for 450,000 barrels for domestic consumption to sell in naira to Nigerian refineries, starting with Dangote as a pilot. Notably, the exchange rate will fix for these transactions.
Eche Idoko, publicity secretary of the Coalition of Refineries Association of Nigeria (CORAN), stated the government intends to supply crude only to Dangote Refinery, which currently produces petrol. He explained that naira sales would start in phases, focusing first on refineries producing Premium Motor Spirit (PMS).
Idoko raised questions about potential discounts during transactions, which could help reduce petrol prices. Moreover, he sought clarification on the fixed exchange rate for these sales.
Earlier announcements confirmed that the NNPC would begin supplying 385,000 barrels per day of crude oil to Dangote Refinery, payable in naira. Adedeji assured that the committee works diligently to ensure the implementation follows the established timeline.
Consequently, the Technical Subcommittee explained that this initiative would relieve pressure on the naira, eliminate unnecessary costs, and improve the availability of petroleum products nationwide.
In the meantime, the implementation committee, led by the Minister of Finance, and the technical committee have collaborated closely with the NNPC and Dangote Refinery to finalize operational details. Adedeji confirmed that the Dangote Refinery would supply petrol and diesel of equivalent value to the domestic market, also payable in naira.
Diesel will sell to interested off-takers, while petrol will only sell to NNPC, which will distribute it to various marketers. Additionally, all regulatory costs will also settle in naira.
To ensure successful execution of this initiative, the technical committee will transition to an implementation and monitoring committee operating in Lagos for the next three to six months. Furthermore, this committee includes representatives from various agencies and aims to create a comprehensive template for effective policy execution.
