The Federal Government has declared that crude oil shipments to the Dangote Refinery in naira will commence on October 1, 2024. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, said this during a meeting with the Implementation Committee in Abuja on Monday.
According to a post on the finance ministry’s official X (previously Twitter) page, the meeting was organized to assess progress on major programs.
During the meeting, the government outlined critical duties for stakeholders such as the Nigerian Midstream and Downstream Petroleum Regulatory Authority, the Central Bank of Nigeria, the Nigerian Upstream Petroleum Regulatory Commission, and the African Export-Import Bank. Their engagement is intended to ensure a smooth transition of crude oil sales to local refineries.
“The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, today led the Implementation Committee meeting on the transition to crude oil sales in naira.
“The meeting reviewed progress on key initiatives, including the upcoming commencement of naira payments for crude oil sales to the Dangote Refinery starting October 1, 2024,” the statement read.
In addition, Zacch Adedeji, the Executive Chairman of the Federal Inland Revenue Service, and the Chairman of the Technical Sub-Committee reported that the first delivery of Premium Motor Spirit (PMS) from Dangote Refinery is anticipated next month, in line with existing agreements.
“The first PMS delivery from Dangote is expected next month under existing agreements,” he said.
Backstory
According to Bizwatch Nigeria, on July 29, the Federal Executive Council endorsed President Tinubu’s proposal to prohibit NNPC from selling crude oil to local refineries in foreign currency.
The Council determined that the 450,000 barrels allocated for domestic use will be sold in Naira to Nigerian refineries, beginning with the Dangote Refinery as a trial project.
This strategy intends to keep both the refined gasoline pump price and the dollar-naira exchange rate stable.
According to recent reports, the Dangote Refinery requires 15 crude oil cargoes per year. The Nigerian National Petroleum Corporation (NNPC) has committed to supplying four of these cargos.
What this means
- The Federal Executive Council’s decision to sell crude oil to Dangote Refinery and other local refineries in Naira, as proposed by President Tinubu, has several key implications for Nigerians:
- This move aims to stabilize pump prices, potentially leading to lower and more predictable fuel costs for consumers.
- Conducting transactions in Naira instead of dollars could reduce pressure on foreign exchange reserves, helping to stabilize the dollar-Naira exchange rate and control inflation.
- Increasing local refining capacity will decrease reliance on imported fuel, saving billions of dollars that can be redirected to other economic areas.
- Boosting local refining capacity enhances Nigeria’s energy security by ensuring a more reliable and self-sufficient fuel supply.
