Naira-For-Crude Deal Between NNPC and Dangote Refinery Begins October 1

The Nigerian National Petroleum Company Limited (NNPC) is set to commence the supply of crude oil to the Dangote Petroleum Refinery in exchange for payments in naira, starting Tuesday, October 1, 2024. This development follows the Federal Executive Council’s approval for the sale of crude oil to local refineries and the corresponding purchase of petroleum products in naira.

The initiative, overseen by the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency, chaired by Zacch Adedeji, is designed to stabilize the naira and reduce the financial pressures related to foreign exchange. Under the deal, NNPC will supply 385,000 barrels of crude oil daily to the $20 billion Lekki-based refinery. In return, the Dangote refinery will provide equivalent amounts of diesel and petrol, all transacted in naira.

The agreement marks a significant step towards alleviating the ongoing economic challenges, particularly the high cost of petroleum products. The sale of crude oil in naira is expected to eliminate unnecessary transaction costs and ensure a steady supply of refined products in the domestic market. Diesel will be available for purchase in naira by any interested off-taker, while petrol will be sold exclusively to NNPC for further distribution to marketers.

The committee, which includes representatives from the Federal Ministry of Finance, NNPC, Central Bank of Nigeria, AfreximBank, and the Nigerian Upstream Petroleum Regulatory Commission, has been working diligently to establish a smooth implementation process. The technical committee is now transitioning to an execution and monitoring committee based in Lagos, where it will oversee operations for the next three to six months.

Despite the positive outlook, modular refineries across the country have expressed concerns about being excluded from the deal. The Crude Oil Refinery-owners Association of Nigeria (CORAN) stated that the committee is only engaging with Dangote, leaving other refineries without clear communication on how the naira-based crude sale will affect them. Many modular refineries are facing significant crude supply challenges, with some operating far below capacity.

As the naira-for-crude deal takes effect, Nigerians are hopeful that it will lead to lower petrol prices and ease the financial burden on citizens. However, the Dangote refinery has yet to announce the official price of its products, urging Nigerians to await a formal announcement from the presidential committee.

The Federal Government has confirmed that it will not intervene in the ongoing price dispute between NNPC and Dangote, as the petroleum sector has been fully deregulated. The government remains optimistic that this new initiative will bring much-needed stability and growth to Nigeria’s economy.