The Federal Executive Council (FEC) has directed the Nigerian National Petroleum Company Limited (NNPCL) to collaborate with Dangote Refinery and other local refineries to address issues with crude oil sales.
Under the leadership of President Bola Tinubu, the FEC also mandated that transactions for crude oil and refined products within Nigeria should be conducted in naira.
Zacch Adedeji, Chairman of the Federal Inland Revenue Service (FIRS), shared this update in Abuja.
He explained that the Dangote Refinery, which is approaching full operational capacity, requires about 15 crude oil cargoes each month, totaling $13.5 billion annually.
NNPCL has committed to supplying four of these cargoes per month, with the remainder sourced from international traders. These transactions are currently in dollars, which strains Nigeria’s foreign currency reserves.
Adedeji proposed that local refineries purchase crude oil from NNPCL in naira at a fixed exchange rate for six months. Additionally, sales of refined products to local marketers should be in naira at the same rate. A settlement bank would handle these transactions, eliminating the need for international letters of credit and saving substantial amounts in USD.
This approach could reduce Nigeria’s foreign exchange expenditure from $660 million to $50 million per month, saving $7.32 billion annually. It would also stabilize petroleum product prices by fixing the exchange rate, thus mitigating the effects of exchange rate fluctuations on pump prices.
According to Adedeji, this strategy would ease pressure on foreign exchange reserves, save $7.32 billion annually, reduce trade finance costs, and stabilize petroleum product prices. Lower petroleum prices could lead to a stronger naira, reduced transportation costs, lower food price inflation, and positive impacts on interest rates and the dollar/naira exchange rate.
He noted that this strategy would lessen government control, promote market independence, and enhance competitiveness and stability.
It could be extended to other refineries to ensure energy security and price stability.
Recently, Dangote Group has faced disputes with international oil companies and Nigerian petroleum regulators over crude oil supply and product quality issues, including claims of attempting to monopolize the market.
