The Nigerian National Petroleum Company Limited’s supply of crude oil in naira to the Dangote Petroleum Refinery would initially last six months, subject to a subsequent evaluation by the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency.
Multiple committee and Dangote refinery sources confirmed on Monday that the naira-for-crude agreement will last six months in its initial phase because crude oil is priced in dollars as an international product.
Meanwhile, Bloomberg reported Monday that the Federal Government planned to transfer up to 400,000 barrels of Nigerian crude oil per day to the Dangote plant.
The report said the development is expected to take place over the next two months, amounting to 24 million barrels of Nigerian crude oil supply between October and November 2024.
Also on Monday, oil marketers stated that they had yet to get any information from NNPC or the Dangote refinery regarding the reported halt of NNPC as the sole off-taker of petrol produced by the Lagos-based refinery.
According to reports on Monday, NNPC is no longer the exclusive off-taker of petrol from the Dangote refinery. Despite many attempts by our journalists to obtain their comments, NNPC and Dangote declined to corroborate this.
While the purported stoppage of NNPC as the sole off-taker of Dangote petrol made headlines in the oil sector on Monday, certain depots halted sales of products in their tanks in anticipation of a likely increase in petrol prices.
This, however, did not happen, as neither NNPC nor the Dangote refinery confirmed the claim. The depots that earlier stopped sales eventually resumed operations after some hours.
Also on Monday, the Independent Petroleum Marketers Association of Nigeria revealed that the NNPC portal used for the purchase of petrol had been opened to IPMAN members by the national oil company.
The portal had earlier been shut to IPMAN members, depriving them of access to pay for products. But on Monday, the independent marketers revealed that the portal had been opened.
Naira-for-crude deal
Several sources said the naira-for-crude deal is to last for six months. They also stated that the product is still being expected by the Dangote refinery.
“We’ve realised that many Nigerians are excited that the government has agreed to the naira-for-crude deal, but most people don’t know that the deal is to last six months in the first instance,” an impeccable source at the Dangote refinery who spoke in confidence due to lack of authorisation to speak on the matter, stated.
On Saturday the Federal Government said it had commenced the sales of crude oil and other refined products in naira. The Federal Ministry of Finance disclosed this in a post on its X handle.
The statement read, “The Minister of Finance and Coordinating Minister of the Economy announced that, in line with the Federal Executive Council directive, the sale of crude oil and refined petroleum products in naira has officially commenced as of October 1, 2024.
“Following a meeting of the Implementation Committee, chaired by the Minister of Finance on October 3, 2024, to conduct a post-commencement review of the Crude Oil and Refined Products Sales in Naira initiative, the commencement of this strategic initiative was affirmed by key stakeholders.”
Last month, the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency announced that the Federal Executive Council under the leadership of President Bola Tinubu had approved the sale of crude to local refineries in naira and the corresponding purchase of petroleum products in naira.
“From October 1, NNPC will commence the supply of about 385kbpd (385,000 barrels per day) of crude oil to the Dangote refinery to be paid for in naira,” the committee had declared.
The government explained in September that the naira-for-crude initiative would help reduce pressure on the naira, eliminate unnecessary transaction costs, and improve the availability of petroleum products across the country.
However, sources stated on Monday that the deal would not last forever.
“The deal is for six months in the first instance. People shouldn’t think it is forever. This is a dollar-based business, so supplying it in naira though at the equivalent dollar rate is significant. The President should be commended for this.
“Otherwise, the local crude would have been purchased from foreign-based traders who often mark up their prices and this has its effect on the cost of producing refined commodities whether in Nigeria or elsewhere,” a senior official at Dangote refinery stated.
A member of the committee on crude sales in naira also corroborated the position, stating that “the deal is for six months in the first instance and would be reviewed when the need arises.”
This comes as Bloomberg claimed that the Federal Government planned to deliver up to 400,000 barrels of Nigerian crude oil per day to the Dangote plant. According to cargo allocations obtained by Bloomberg News, Dangote’s increasing reliance on domestic feedstock may destabilize the Atlantic oil market by significantly reducing Nigerian crude exports.
The 650,000 barrels per day plant, which is larger than any other in Africa or Europe, will receive 13 to 14 shipments from Nigeria’s usual monthly programme of 50 cargoes.
According to Ronan Hodgson, a FGE analyst based in London, the West African crude market would be “substantially tighter” in the fourth quarter due to Dangote’s supplies. The volumes could even send Nigerian exports below one million barrels a day, he said.
Some shipments over the next two months may not be delivered as planned, and October’s list includes two cargoes already delayed from September.
Still, the scheduled volume is significantly larger than the average 255,000 barrels a day of Nigerian oil taken in by Dangote over the first half of the year as it gradually ramped up processing, data compiled by Bloomberg show.
