D espite President Bola Tinubu's directive for domestic refineries to purchase crude oil in naira, the Dangote Petroleum Refinery and other local refineries have yet to commence such transactions. The $20 billion Dangote plant, alongside other Nigerian refineries, is still awaiting a response from the Nigerian National Petroleum Company Limited (NNPC) regarding their requests for crude oil.
The Crude Oil Refiners Association of Nigeria (CORAN) confirmed that individual refiners had written to the NNPC requesting crude, but there has been no reply. This comes after the Federal Executive Council (FEC) adopted Tinubu's proposal to sell crude to the Dangote refinery and other emerging refineries in naira. The plan was to use the Dangote refinery as a pilot, offering the 450,000 barrels meant for domestic consumption in naira at a fixed exchange rate for the transaction duration.
Lack of Implementation
Eche Idoko, the Publicity Secretary of CORAN, noted that the Nigerian Midstream and Downstream Petroleum Authority (NMDPRA) is expected to initiate the process. However, almost a week after the announcement, no action has been taken.
“We have not started buying crude from NNPC. Individual members have written to them (NNPC) already, and they have several requests from these refineries before them. Typically, we would expect our regulator, in this instance, the NMDPRA, to kickstart the process by calling for a meeting of all parties to discuss the framework for such supply or have NNPC respond to the various letters to it by the refineries requesting for crude,” Idoko stated.
Potential Benefits and Challenges
Idoko praised Tinubu for considering indigenous refiners and suggested that an executive order be issued to solidify the directive. The supply of crude oil to local refineries in naira is expected to reduce petrol costs and strengthen the naira against the dollar.
“Yes, we will see a rebound in the pricing of fuel once the President’s order is implemented. Mind you, the pronouncement alone is not enough. It must be with a force of law, either by executive order or by incorporating it into a new guideline so that the crude producers will be bound to sell to us in naira,” Idoko added.
Challenges with International Oil Companies
The Dangote refinery and other domestic refiners have faced challenges in accessing crude oil. The Dangote Group management has accused International Oil Companies (IOCs) of complicating crude supply to their 650,000-capacity refinery by insisting on selling through foreign agents. This has led to higher local crude prices due to trading arms offering cargoes at $2 to $4 per barrel above the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) official price.
A senior official at the Dangote refinery, requesting anonymity, confirmed that the plant had not started purchasing crude in naira from NNPC. Furthermore, the NNPC spokesperson, Olufemi Soneye, did not respond to inquiries on the matter.
Conclusion
The implementation of the directive for domestic refineries to purchase crude oil in naira remains in limbo, with refiners awaiting a formal response from NNPC. The move, aimed at reducing petrol costs and strengthening the naira, requires immediate attention and action from relevant authorities to ensure its success.
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