In a significant win for Africa’s richest man, Aliko Dangote, the Federal Executive Council has approved President Tinubu’s proposal to sell crude oil to Dangote Refinery and other upcoming refineries in Naira.
The landmark announcement by the federal government is aimed at stabilizing fuel pump prices and the dollar-Naira exchange rate,
Currently, Dangote Refinery requires 15 cargoes of crude annually, amounting to $13.5 billion. The Nigerian National Petroleum Corporation (NNPC) has committed to supplying four of these cargoes.
President Approves sale of crude to refinery
The Federal Executive Council’s new directive will see the 450,000 barrels of crude earmarked for domestic consumption sold to Nigerian refineries in Naira, with Dangote Refinery serving as the pilot for this initiative.
The exchange rate will be fixed for the duration of this transaction.
Afreximbank and other Nigerian settlement banks will facilitate the trade between Dangote Refinery and NNPC Limited.
This intervention aims to eliminate the need for international letters of credit and is expected to save the country billions of dollars currently spent on importing refined fuel.
What they are saying: According to a press release published by the government, the move is aimed at ensuring stability of the pump price while also exchange rate.
“To ensure the stability of the pump price of refined fuel and the dollar-Naira exchange rate, the Federal Executive Council today adopted a proposal by President Tinubu to sell crude to Dangote Refinery and other upcoming refineries in Naira.
Dangote Refinery at the moment requires 15 cargoes of crude, at a cost of $13.5 billion yearly. NNPC has committed to supply four.
But the FEC has approved that the 450,000 barrels meant for domestic consumption be offered in Naira to Nigerian refineries, using the Dangote refinery as pilot. The exchange rate will be fixed for the duration of this transaction.
Afreximbank and other settlement banks in Nigeria will facilitate the trade between Dangote and NNPC Limited. The game changing intervention will eliminate the need for international letters of credit. It will also save the country of billions of dollars used in importing refined fuel.”
What this means for Dangote
This announcement marks a significant victory for Aliko Dangote, who has been in a protracted conflict with regulatory authorities at the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the government-owned NNPC Ltd, amidst accusations of monopolistic practices.
The management of the 650,000 barrel-per-day Dangote Refinery has also alleged that International Oil Companies (IOCs) have been attempting to undermine its success.
However, after numerous interventions and criticisms from Nigerians, the media, private sector organizations, and prominent figures such as President of the AfDB Femi Adesina, along with support from billionaires like Femi Otedola, the government was pressured to address the issue.
Nairametrics understands that a deal was eventually reached last week, following the intervention of President Tinubu, thus concluding the battle over who determines the future of energy security in Nigeria.
What this means for Nigerians
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.
