In a groundbreaking decision, President Bola Tinubu has approved the sale of crude oil to domestic refineries, including the Dangote Petroleum Refinery, in naira. This strategic move is poised to revolutionize Nigeria’s oil sector, promising a cascade of benefits for the economy and consumers alike.
Industry experts and oil marketers have hailed the decision as a game-changer. The initiative is expected to significantly reduce the prices of locally refined petroleum products, bolster the country’s foreign exchange reserves, and strengthen the naira against major currencies.
The Federal Executive Council’s approval of this policy targets the stability of fuel pump prices and the dollar-naira exchange rate. It addresses the long-standing issue of domestic refineries struggling to access US dollars for crude procurement, despite Nigeria being a major oil producer.
Dangote refinery, which requires about 15 cargoes of crude oil annually at approximately $13.5 billion, will serve as the pilot for this new policy. The Nigerian National Petroleum Company Limited (NNPC) has committed to supplying four cargoes, with the remaining to be sourced under the new naira-based arrangement.
President Tinubu’s Special Adviser on Revenue, Zacch Adedeji, projects substantial economic benefits from this move. He estimates annual forex savings of $7.3 billion and a reduction in monthly forex expenditure on petroleum products from $660 million to just $50 million.
Industry stakeholders, including the Independent Petroleum Marketers Association of Nigeria and the Crude Oil Refiners Association of Nigeria, have lauded the initiative. They anticipate a strengthening of the naira and a significant drop in fuel prices as a result of this policy.
However, some experts, like Professor Dayo Ayoade of the University of Lagos, while welcoming the move, have raised questions about the government’s ability to meet the growing demand for crude from domestic refineries, especially in light of issues like oil theft.
The policy also addresses complaints from Dangote and other domestic refiners about difficulties in accessing crude oil. It aims to eliminate the need for international letters of credit and save billions of dollars previously spent on importing refined fuel.
As Nigeria embarks on this new chapter in its oil sector management, the world watches closely to see how this bold move will reshape the country’s economic landscape and potentially serve as a model for other oil-producing nations.