Various unconfirmed reports have alluded that the highly anticipated sale of crude to Dangote refinery in local currency may likely start this week.
Though no official comment on this has come from the Nigerian National Petroleum Company Limited (NNPCL) the Agency of Government to spearhead the sale nor admittance from Dangote that such sale is about to start, some industry sources are concerned about reality of the situation.
Meanwhile reports says the Federal Government will start selling crude oil in local currency instead of the US dollar, which is still widely used for international commodity trading.
The latest announcement comes after several countries began selling oil and gas in local currencies following the outbreak of the Russia-Ukraine conflict in February 2022.
The director of Information and Public Relations at the Ministry of Finance, Mohammed Manga, announced in a statement on Sunday that the Federal Executive Council (FEC) has directed that crude oil sales be conducted in naira.
Manga noted that this strategic initiative is expected to create a lasting impact on the Nigerian economy by enhancing growth, stability, and self-sufficiency.
He emphasised that Nigeria is still navigating the complexities of global markets and that this strategic move positions the country for future success.
Nigeria has proven oil reserves of approximately 37 billion barrels, accounting for 3.1 per cent of the world’s total reserves.
Nigeria is one of the top 15 countries in the world for crude oil production, with the eighth-largest oil reserves and the sixth-largest exporter of oil globally.
The NNPCL was to commence selling crude to the country’s 650,000 b/d Dangote refinery in the local currency on 1 October.
Co-ordinating Minister of the economy Wale Edun said he has conducted “a post-commencement review” of the programme, where downstream regulator NMDPRA, NNPCL and Dangote officials confirmed the start of sales in naira.
“From 1 October, NNPC will commence the supply of approximately 385,000 b/d of crude oil to the Dangote refinery, which will be paid for in naira,” Edun had said previously.
The programme will also involve Dangote supplying gasoline and diesel of “equivalent value to the domestic market to be paid for in naira”.
The crude and product sales will be valued in dollars at prevailing international market prices, but financial settlements will be completed in naira at a fixed exchange rate that has so far not been disclosed. Maritime and port regulatory costs for coastal deliveries of crude and products under the programme, which are normally collected in dollars, “will also be paid for in naira”, Edun said.
The Nigerian Ports Authority’s Managing Director, Abubakar Dantsoho, previously confirmed the set-up of a “one-stop shop that will co-ordinate service provision from all regulatory and security agencies”, listing Nigerian ports, maritime, customs and tax authorities and the navy as participants.
Dangote will sell diesel volumes under the programme “to any interested offtaker”, the government said, but gasoline will only be sold to NNPCL . “NNPCL will then sell to various marketers for now,” according to the government.
“Since gasoline is still subsidised by the government, using discounted foreign exchange [available] only to NNPC, prices at wholesale and retail are still considerably below the market. That is why only NNPC can buy Dangote’s gasoline today,” said Bob Dickerman, the Chief Executive of Pinnacle oil and gas.
Nigeria’s diesel market has been deregulated since 2003 but efforts to remove the country’s longstanding gasoline subsidy have stalled. Dangote started sales of gasoline to NNPC on 15 September under an older contract in which the national oil company pays the refiner in dollars.
Argus tracking shows Dangote’s crude receipts rose by 5 per cent on the month to 195,000 b/d in September.
Dangote said it is aiming for a run rate of 350,000 b/d in its first phase of operations but has fallen short of that level in every month this year except for June.