In a significant shift, the Federal Government has acceded to the demands of domestic crude oil refiners and other industry stakeholders by announcing that indigenous refineries can now purchase crude oil using either naira or dollars.
This landmark decision, disclosed on Monday, came as part of the unveiling of a new template for domestic crude oil supply obligations by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) at a briefing held in Abuja.
According to the NUPRC, the move is in compliance with the provisions of Section 109(2) of the Petroleum Industry Act 2021. The commission, in collaboration with key stakeholders including NNPC Upstream Investment Management Services, representatives of crude oil/condensate producers, and refinery owners, including Dangote Petroleum Refinery, developed the template to ensure a seamless implementation of the Domestic Crude Oil Supply Obligation (DCSO).
Gbenga Komolafe, the Chief Executive of NUPRC, speaking at the briefing, emphasized the importance of the new template in fostering consistent crude oil supply to domestic refineries and facilitating easier transactions. He clarified that the currency for transactions could be either in naira or dollars, with naira transactions potentially alleviating pressure on the country’s foreign exchange rate.
The decision comes in response to concerns raised by modular refineries, which were facing the threat of shutdown due to challenges in accessing foreign exchange for crude oil purchases. These refineries, with a combined capacity of producing 200,000 barrels of crude oil daily, had been struggling to secure dollars amidst the country’s foreign exchange crisis.
Eche Idoko, the Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), highlighted the significance of purchasing crude oil in naira, stating that it would not only ease pressure on the naira but also make refined products more affordable, thus encouraging more investment in local refineries.
In addition to addressing currency concerns, the government also announced positive growth in crude oil and gas reserves. As of January 1, 2024, Nigeria’s total crude oil and condensate reserves stood at 37.5 billion barrels, with associated gas and non-associated gas reserves reaching 209.26 trillion cubic feet. These figures represent a positive outlook for the nation’s oil and gas industry, signaling potential growth and sustainability in the years to come.
