President Bola Tinubu’s directive to sell crude oil to the Dangote Petroleum Refinery in naira is set to significantly reduce the prices of domestically refined petroleum products, industry experts and stakeholders stated on Monday. The move, they said, would bolster the output of domestic refineries, increase foreign exchange reserves, and strengthen the naira.
Downstream oil sector operators praised the President’s decision, highlighting its potential to alleviate the foreign exchange pressures that have long plagued Nigeria’s refining sector. They commended the media for keeping this issue at the forefront, stressing that Nigerian refineries should not struggle to procure dollars for crude oil produced domestically.
Tinubu’s directive, announced by the Special Adviser to the President on Information and Publicity, Bayo Onanuga, mandates the Nigerian National Petroleum Company Limited (NNPC) to sell crude to the Dangote refinery and other upcoming refineries in naira. This strategic shift, adopted by the Federal Executive Council (FEC), aims to stabilise fuel pump prices and the naira-dollar exchange rate.
The Dangote refinery, which has faced crude oil supply issues with international oil companies (IOCs) and regulatory challenges, currently requires about 15 cargoes of crude oil annually, amounting to $13.5 billion. The NNPC has committed to supplying four of these cargoes. The President’s order will ensure that this crude supply, along with crude for other domestic refineries, is priced in naira rather than dollars.
“The Federal Executive Council today adopted a proposal by President Tinubu to sell crude to the Dangote refinery and other upcoming refineries in naira. This move will stabilise the pump price of refined fuel and the dollar-naira exchange rate,” Onanuga stated in a post on X (formerly Twitter).
The directive also stipulates that the 450,000 barrels of crude allocated for domestic consumption will be offered in naira, using the Dangote refinery as a pilot. Afriexim Bank and other Nigerian settlement banks will facilitate transactions between Dangote and the NNPC, eliminating the need for international letters of credit and saving the country billions of dollars in import costs.
Special Adviser on Revenue, Zacch Adedeji, who also chairs the Federal Inland Revenue Service, emphasised the economic benefits of this policy. “By denominating crude oil transactions in naira, we expect to significantly reduce our forex burden, with estimated annual savings of $7.3 billion. Monthly forex expenditure on petroleum products is projected to decrease from $660 million to $50 million,” Adedeji said.
The new policy is expected to stabilise pump prices and ease economic predictability by reducing forex fluctuations. “This will reduce our monthly forex expenditure by 94 percent, saving us $7.32 billion annually,” Adedeji explained.
The OPSN, encompassing major business organisations like the Manufacturers Association of Nigeria and NACCIMA, welcomed the policy, noting that it would mitigate the economic impact of potential protests and ensure business continuity. “Our members are key drivers of economic growth. Any disruption could have significant repercussions on the economy and livelihoods,” the OPSN stated.
Industry stakeholders, including oil marketers and modular refinery operators, also lauded the initiative. Chief Ukadike Chinedu of the Independent Petroleum Marketers Association of Nigeria expressed gratitude to the President for listening to industry and public demands. “This move will strengthen the naira and improve its value in the international market. It’s one of the best developments in Nigeria’s oil sector,” Chinedu said.
Eche Idoko, Publicity Secretary of the Crude Oil Refiners Association of Nigeria, highlighted the policy’s potential to reduce petrol costs and strengthen the naira against the dollar. He called for an executive order to formalise the directive and a collaborative meeting with the government’s economic team to ensure a favourable pricing regime.
“The crude sale in naira will give the naira leverage against the dollar, reducing the cost of refining and subsequently lowering pump prices. We need robust collaboration to ensure price advantages for local consumers,” Idoko said.
Professor Dayo Ayoade of the University of Lagos remarked on the significance of the government’s commitment, though he noted the importance of ensuring the availability of crude for local consumption. “It’s good news if the crude hasn’t been forward-sold by the previous administration. The government needs to tackle crude oil theft and ramp up production to meet domestic needs,” Ayoade said.
The Dangote refinery has previously faced challenges in securing crude oil from IOCs, with the company highlighting issues of inflated prices and prioritisation of foreign buyers. Mr DVG Edwin, Vice President of Oil & Gas at Dangote Industries, pointed out that the IOCs’ practices were detrimental to local refineries. “The IOCs have consistently frustrated our efforts to obtain locally-produced crude, often offering cargoes at prices significantly above the market rate,” Edwin stated.
With President Tinubu’s directive, the Nigerian government aims to ensure that domestic refineries are adequately supplied with crude oil at competitive prices, fostering economic stability and growth. This landmark policy is expected to transform Nigeria’s refining sector and fortify the naira’s position in the global market.
