The Federal Executive Council (FEC) has reportedly adopted a presidential initiative to sell crude oil to the Dangote Refinery and other upcoming refineries in Naira rather than in foreign currency.
The Dangote Refinery alone requires 15 crude cargoes annually, costing approximately $13.5 billion.
The Nigerian National Petroleum Corporation (NNPC) has committed to supplying four of these cargoes. However, to further support local refineries, the FEC has approved that the 450,000 barrels of crude oil meant for domestic consumption be sold in Naira to Nigerian refineries. The Dangote Refinery will serve as the pilot for this initiative.
To facilitate this new arrangement, Afreximbank and other settlement banks in Nigeria will oversee the transactions between Dangote and NNPC Limited. The new policy came after the government regulators appeared to be hostile to Nigeria’s biggest investor – the Dangote Group, sparking outcry about the outside perception of investment risks in Nigeria.
The company had gone ahead to receive crude from the United States and was making strategic moves to secure deliveries from Angola and Libya.
This policy shift should save the country billions of dollars spent on importing refined fuel.
Benefits To The Economy
President Tinubu’s proposal is a game changer for Nigeria’s oil and gas sector. It offers a lifeline to local refineries while reducing the financial strain on the foreign reserve. The policy will also enhance the operational capacity of the Dangote Refinery, one of the world’s largest, with the potential to refine up to 650,000 barrels of crude oil per day.
By selling crude oil in Naira, the government aims to ensure a more stable and predictable market for refined fuel, reducing the volatility caused by fluctuating exchange rates. This move is also expected to foster greater investment in the Nigerian oil refining sector, encouraging other potential refineries to commence operations under similar terms.
The successful implementation of this strategy at the Dangote Refinery could serve as a model for future initiatives aimed at bolstering Nigeria’s industrial and economic landscape.
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