Tinubu Mandates Crude Oil Sales in Naira to Dangote; Experts Weigh In on Implications
In a move aimed at transforming Nigeria’s oil industry and stabilizing the economy, President Bola Tinubu has approved a policy allowing domestic refineries, including the Dangote Petroleum Refinery, to purchase crude oil in naira rather than dollars. This major shift, announced on Monday, July 29, is expected to impact fuel prices and reshape the oil sector.
The Special Adviser to the President on Information and Publicity, Bayo Onanuga, explained in a statement on Monday, July 29, that the policy aims to stabilize fuel pump prices and curb volatility in the dollar-naira exchange rate.
“To ensure the stability of refined fuel prices and the dollar-naira exchange rate, the Federal Executive Council has adopted President Tinubu’s proposal to sell crude to the Dangote refinery and other local refineries in naira,” Onanuga announced via his official X account.
The Dangote refinery, a major player with a capacity of 650,000 barrels per day, has struggled with crude oil supply issues this year, relying heavily on imports due to difficulties with International Oil Companies (IOCs). The new directive is set to alleviate these issues by allowing local refineries to buy crude in naira, thus reducing the foreign exchange burden.
Although the Dangote Refinery requires 15 cargoes of crude at a cost of $13.5 billion yearly, the NNPC has committed to supplying four of these needs.
Additionally, the Federal Government has decided that 450,000 barrels of crude, intended for domestic use, will now be sold in naira. This policy change is anticipated to significantly cut Nigeria’s forex expenditure on fuel imports. Special Adviser on Revenue, Zacch Adedeji, highlighted that this shift could lower monthly forex spending on petroleum products from around $660 million to $50 million, potentially saving the country $7.3 billion annually.
What Experts Are Saying About Dangote And Refineries Buying Crude in Naira
Oil marketers and refiners have welcomed the initiative, recognizing its potential to benefit the Nigerian economy. Chief Ukadike Chinedu of the Independent Petroleum Marketers Association of Nigeria praised the President for responding to industry demands for localized crude sales. Eche Idoko of the Crude Oil Refiners Association of Nigeria also noted that the new policy would reduce fuel costs and support the naira.
Emmanuel Adetayo, a financial analyst who believes that Dangote importing crude strains the naira, said that production needs to increase to cater to oil refineries in the country.
“The reason we are still in this region where we need to rely on the strength of the naira against the dollar is that Dangote imports crude oil,” he told Neusroom.
He added that for the recent move of local refineries paying in naira to be more effective, oil production in the country needs to be increased in order to cater to the demands of the refineries.
“We need to increase production, basically. If we can produce over 2 million barrels a day, we can conveniently provide for Dangote and other refineries,” he said.
