The federal government has disclosed that indigenous refineries in the country such as Dangote Refineries can now buy crude from the Nigerian National Petroleum Company Limited, NNPCL in naira.
The government made this known on Monday in Abuja the nation’s capital through the Nigerian Upstream Petroleum Regulatory Commission, NUPRC.
The commission stated that this is in line with the provisions of Section 109(2) of the Petroleum Industry Act 2021, as it relates to the activities for Domestic Crude Oil Supply Obligation.
This development appears to be a good news to Nigerians who insist that local refineries should be allowed to purchase crude oil from the NNPLC in the local currency. If this is done, they argue, the price of petrol and diesel would significantly reduce.
According to the chief executive officer of NUPRC, Gbenga Komolafe, the stakeholders in the sector which include Dangote, NNPC Upstream Investment Management Services, representatives of Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, have agreed that the payment template for crude oil could either be in dollar or naira.
He said: “The commission in conjunction with relevant stakeholders from NNPC Upstream Investment Management Services, representatives of Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery came up with the template for the buy-in of all.
“This is in a bid to foster a seamless implementation of the DCSO and ensure consistent supply of crude oil to domestic refineries,” the Chief Executive, NUPRC, Gbenga Komolafe, told journalists in Abuja.
“The PIA intends to make the implementation (of crude oil obligation) very easy for the parties, both for the producers and refineries. So the answer simply is that the currency for the transaction would either be in naira or dollar. That is the simple answer.
“But we all know that if the transaction is carried out in naira, that itself will free the pressure on the exchange rate. That will help the exchange rate. So that is the intent and besides, the overall intent of the Petroleum Industry Act is to develop our midstream, which is a very laudable provision of the PIA.”
The announcement comes on the heel of the remark of Aliko Dangote that the Dangote Refinery has reduced the price of diesel to petroleum marketers to N1200 from N1800 per litre.
The Africa’s richest man had told reporters after paying the Sallah homage to President Bola Ahmed Tinubu in Lagos last week, that the prices of diesel and petrol could be reduced further depending on the exchange rate of the naira to the dollar.
What Dangote Said
“In our refinery, we started selling diesel at about ₦1,200 for ₦1,650 and I’m sure as we go along…this can help to bring inflation down immediately,” Dangote told journalists after he paid Eid-el-Fitr homage to President Bola Tinubu at his residence.
“I believe that we are on the right track. I believe Nigerians have been patient and I also believe that a lot of goodies will now come through. There’s quite a lot of improvement because if you look at it, one of the major issues that we’ve had was the naira devaluation that has gone very aggressively up to about ₦1,900.
“But right now, we’re back to almost ₦1,250, ₦1,300, which is a good reprieve. Quite a lot of commodities went up. When you go to the market, for example, something that we produce locally like flour, people will charge you more. Why? Because they’re paying very high diesel prices.
“Now, in our refinery, we started selling diesel at about ₦1,200 instead of ₦1,650 and I’m sure as we go along, things will continue to improve quite a lot.
“If you look at it now, when you are buying ₦1,650 or ₦1,700 for a litre of diesel, and that one has been cut off by almost two-thirds, you are now paying ₦1,200 for diesel.
“Maybe, going forward, even though the crude prices are going up, I believe people will not get it much higher than what it is today, ₦1,200. It might be even a little bit lower, but that can help quite a lot because if you are transporting locally-produced goods and you were paying ₦1,650, now you are paying two-thirds of that amount, ₦1,200. It’s a lot of difference. People don’t know.
“This can help to bring inflation down immediately. And I’m sure when the inflation figures are out for the next month, you’ll see that there’s quite a lot of improvement in the inflation rate. So step at a time. And I’m sure the government is working around the clock to make sure that things get much better.”
But, stakeholders in the sector have now opined that the price of the products should witness a downward trend since crude oil will be sold to Dangote and other domestic refineries in naira.
“What this mean is that the variation in the exchange rate would no longer be a determinant factor for the price of petrol and diesel and other petroleum products. Apart from this, other costs such as freight, insurance, shipping that usually push up the pump price of these product have also been removed, so long that the crude is purchased from the NNPCL,” Alade Samson, an energy expert said.
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