The Federal Government’s technical sub-committee on the naira-for-crude policy is set to reconvene on Monday to address the ongoing crisis surrounding crude oil supply to domestic refiners, including the Dangote Petroleum Refinery.
The Nigerian National Petroleum Company Limited (NNPCL) has reportedly allocated large volumes of crude to foreign creditors to settle outstanding loans, creating supply challenges for domestic refiners and disrupting the naira-for-crude arrangement with Dangote refinery.
Insiders familiar with the matter confirmed that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has been tasked with developing alternative options for the supply shortfall. These options will be reviewed when the panel meets next week.
Dangote Halts Sale of Petroleum Products in Naira
The supply issues have already affected operations at Dangote refinery. On Wednesday, the refinery announced a temporary suspension of petroleum product sales in naira, citing challenges in aligning sales proceeds with crude oil purchase obligations, which are currently denominated in US dollars.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” the refinery stated.
Following the announcement, the cost of loading petrol at private depots in Lagos surged to about N900/litre, up from less than N850/litre before the suspension.
An insider familiar with the workings of the naira-for-crude panel suggested that the transaction would likely resume once the crude supply issue is resolved.
“The sticking point is the issue of crude availability, with NNPC claiming it has pre-sold large volumes of crude,” the source explained.
High-Level Talks Underway
The panel’s last meeting at the Ministry of Finance Headquarters in Abuja included key government officials and industry stakeholders. Attendees included:
Minister of Finance and Coordinating Minister of the Economy, Wale Edun (joining virtually)
Executive Chairman of the Federal Inland Revenue Service, Dr Zacch Adedeji
Chief Financial Officer of NNPCL
Executive Commissioner of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (joining virtually)
Special Adviser to the Minister, Nana Ibrahim
Coordinator of NNPC Refineries
Representatives from NUPRC, Central Bank of Nigeria (CBN), Dangote Petroleum Refinery, and NNPC Trading Ltd
NNPCL presented a crude delivery report at the meeting, detailing the volume allocated for domestic refining. However, the talks failed to resolve the currency misalignment, leading to Dangote’s decision to halt naira-based sales.
Marketers Seek Alternatives
Petroleum marketers have begun exploring alternative supply sources to mitigate potential disruptions from the Dangote refinery’s suspension.
Billy Gillis-Harry, National President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), said the market is preparing for unforeseen challenges.
“The market is making preparations for any surprises. If Dangote refinery insists on dollar-denominated sales, we’ll explore other options, including sourcing from NNPC and other local refineries, or resorting to imports,” Gillis-Harry stated.
He added that stakeholders are hopeful the crisis will be resolved swiftly to prevent fuel scarcity.
“We’re already enjoying the availability of petroleum products. We must ensure this stability is maintained,” he said.
Gillis-Harry emphasised the need for diversification in the downstream sector, urging the government to expand local refining capacity and consider strategic imports.
“We’ll make sure that we have different sources of petroleum products. If one source creates difficulty, we have to look elsewhere,” he noted.
NNPCL Maintains Supply Commitment
NNPCL spokesperson Olufemi Soneye maintained that the company remains committed to supplying crude for local refining based on agreed terms and conditions.
“NNPCL remains committed to supplying crude for local refining based on mutually agreed terms and conditions. Additionally, NUPRC has disclosed that all local refining companies collectively produce less than 50% of our national consumption,” Soneye stated.
Stakeholders Urge FG to Intervene
Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Hammed Fashola, urged the government to resolve the disagreement with Dangote refinery to prevent market instability.
“The masses today are happy with the drop in petrol prices. But since the suspension, private depot owners have started reacting by raising prices. On Tuesday, petrol was sold at N825 to N826 per litre, but by Wednesday, prices climbed to N835 to N836 per litre,” Fashola said.
He appealed to the government to uphold the naira-for-crude arrangement to ensure price stability and protect consumers from future price hikes.
