In a significant policy shift, the Federal Government of Nigeria has officially initiated the sale of crude oil and refined petroleum products in naira as of October 1, 2024. This decision, conveyed through a post on the Ministry of Finance’s X handle, aligns with directives from the Federal Executive Council (FEC) under President Bola Tinubu’s administration. However, the government has not provided comprehensive details on the contractual agreements made or how pricing for these products will be established. This move is positioned as an essential strategy to bolster the economic value of the Nigerian currency, reducing dependency on foreign currency and enhancing domestic oil production efforts.
A subsequent meeting of the Implementation Committee, which included various stakeholders including the Minister of Finance, took place on October 3, 2024. This meeting aimed to conduct a review of the program’s kickoff and verify the initiative’s effectiveness in achieving its intended objectives. Last month, the Technical Sub-Committee on Domestic Sales had previously announced the FEC’s approval for the sale of crude oil to local refineries, also in naira. As part of this move, the Nigerian National Petroleum Company (NNPC) is set to provide around 385,000 barrels per day (kbpd) of crude oil to the Dangote refinery, marking a new era of transactions aimed at streamlining the oil industry.
Despite official statements claiming the initiative has commenced, there appears to be some confusion among officials at the Dangote refinery and other regulatory bodies. Reports indicate that many stakeholders were unaware of whether the crude oil sales in naira had actually started, raising questions about the operational readiness of this change. Such uncertainty underscores the need for better communication among the agencies involved to ensure that all parties are aligned and informed. The transition to naira-based transactions is intended to ease pressure on the Nigerian economy and mitigate the challenges associated with utilizing foreign currencies for oil purchases.
Economically, the naira-for-crude initiative is aimed at stabilizing the national currency while eliminating unnecessary transactional costs. By removing the reliance on the dollar for local oil transactions, the initiative seeks to improve the availability of petroleum products domestically. The government’s rationale includes the expectation that moving these sales to naira will create a more inclusive economic environment and enhance the purchasing power of average Nigerians, while also benefiting local refiners and suppliers through currency consistency.
In its implementation, the initiative outlines that the Dangote refinery will pay for crude oil provided by NNPC in naira and, in exchange, will supply petrol (PMS) and diesel to the local market. While the Dangote refinery’s diesel will be available for any interested buyers, the supply of petrol will be specifically directed to NNPC for further distribution to marketers. Furthermore, regulatory costs associated with the transactions involving various agencies, including the Nigerian Ports Authority and the Nigerian Maritime Administration and Safety Agency, will also be settled in naira, facilitating smoother processes across the board.
The ongoing collaboration between government officials, financial experts, and representatives from the Dangote Group emphasizes the importance of establishing a streamlined framework for this initiative. Participants in the planning meetings, including the Minister of State for Petroleum and the Chief Executive Officer of NNPC, have highlighted the formation of a one-stop shop designed to coordinate service provision from various regulatory agencies to ensure efficient execution of the naira-for-crude policy. The successful realization of this initiative could set a new paradigm in how Nigeria engages with the global oil market, further strengthening the nation’s economic landscape while fostering local industry growth.
