Tinubu’s Approval for Naira Crude Oil Sales to Dangote Refinery Set to Slash Fuel Prices
President Bola Tinubu’s directive to sell crude oil to the Dangote Petroleum Refinery in naira is expected to significantly reduce the prices of domestically refined petroleum products, according to oil marketers, refiners, and industry experts. This groundbreaking decision, announced on Monday, has been lauded as a strategic move that will bolster domestic refinery output, enhance foreign exchange reserves, and strengthen the naira.
Operators in the downstream oil sector have welcomed the President’s approval, recognising its potential to transform the industry. The move was widely praised during Monday’s announcement, where stakeholders highlighted its benefits in addressing the longstanding challenges faced by Nigerian refineries, particularly the struggle to secure US dollars for procuring locally-produced crude oil.
President Tinubu directed the Nigerian National Petroleum Company Limited (NNPC) to sell crude oil in naira to the Dangote refinery and other upcoming refineries. This directive, as disclosed by the President’s Special Adviser on Information and Publicity, Bayo Onanuga, via his official X handle, was adopted by the Federal Executive Council to stabilise the pump price of refined fuel and the dollar-naira exchange rate.
The Dangote refinery, which has faced supply issues with International Oil Companies (IOCs) operating in Nigeria, has struggled to secure sufficient crude oil. Earlier this year, the 650,000 barrels-per-day refinery received crude from the NNPC and a few IOCs but later reported that IOCs were unwilling to supply the required quantities, forcing the refinery to import crude massively.
Presently, the Dangote refinery needs about 15 cargoes of crude oil annually, worth approximately $13.5 billion. While the NNPC has committed to supplying four cargoes, President Tinubu’s latest order ensures that these supplies, as well as those for other domestic refineries, will be denominated in naira instead of dollars.
Onanuga revealed that the Federal Executive Council approved that the 450,000 barrels earmarked for domestic consumption be offered in naira to Nigerian refineries, using the Dangote refinery as a pilot scheme. He noted that this measure is expected to stabilise the pump price of refined fuel and maintain a fixed exchange rate for the duration of the transaction.
“Afreximbank and other settlement banks in Nigeria will facilitate the trade between Dangote and NNPC Limited. This game-changing intervention will eliminate the need for international letters of credit and save the country billions of dollars currently spent on importing refined fuel,” Onanuga stated.
The President’s Special Adviser on Revenue, Zacch Adedeji, who also chairs the Federal Inland Revenue Service, highlighted the financial benefits of the move. He noted that it mitigates Nigeria’s heavy reliance on foreign exchange for crude oil imports, which account for roughly 30 to 40 per cent of its forex expenditure. By denominating crude oil transactions in naira, the government expects to save an estimated $7.3 billion annually and reduce monthly forex expenditure on petroleum products from $660 million to $50 million.
“Monthly, we spend roughly $660 million in these exercises, and if you analyse that, it gives us $7.92 billion in annual savings,” Adedeji explained. “With this approval, this has been reduced by a minimum of 90 per cent because transactions are now conducted in our local currency, not only with Dangote refinery but all local refineries for all our local consumption, which will stabilise the pump price.”
Adedeji enumerated further benefits, including a reduction in foreign exchange pressure and finance costs, predicting a more predictable and stable economic environment as forex fluctuations decrease.
Oil marketers and operators of modular refineries have lauded the initiative, outlining the numerous gains it will bring to Nigeria. Chief Ukadike Chinedu, National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, expressed gratitude to President Tinubu for listening to the voice of the masses and marketers. He stressed that localising the sale of crude oil in naira is the key to resolving frequent petrol shortages and boosting the naira’s value on the international market.
Eche Idoko, Publicity Secretary of the Crude Oil Refiners Association of Nigeria, also commended the move, emphasising that selling crude in naira would lower petrol costs and strengthen the naira against the dollar. However, he called for an executive order to solidify the directive and suggested a meeting with the economic team to determine a favourable rate for the Nigerian market.
Professor Dayo Ayoade, an energy expert from the University of Lagos, noted the strategic importance of the government’s decision but questioned if the crude meant for local consumption had not been forward-sold by the previous administration. He highlighted the necessity of addressing crude oil theft and ramping up production to meet the increased demand from local refineries.
Despite these positive developments, the Dangote refinery and other domestic refiners have expressed concerns about the difficulties in accessing crude oil. The Dangote Group management recently alleged that IOCs continue to frustrate their efforts to secure locally-produced crude, preferring to sell to foreign agents at premiums above the official price set by the Nigerian Upstream Petroleum Regulatory Commission.
As the implementation of President Tinubu’s directive progresses, industry stakeholders remain optimistic about its potential to revolutionise Nigeria’s oil sector, ensuring stability and growth while fostering a more self-reliant and economically robust nation.
