The National Publicity Secretary of the Independent Petroleum Marketers of Nigeria (IPMAN) Chinedu Ukadike has said that petrol marketers may be forced to retail petroleum products in dollars following the decision of the Dangote Petroleum Refinery to end the sale of petroleum products in Naira and sell in the dollar.
This follows the expiration of the first phase of the Naira-for-Crude arrangement between the federal government and local refineries, including Dangote.
In a telephone interview with Nairametrics, Ukadike said he was shocked by the announcement by the Dangote refinery and expressed concerns about its impact on pump prices and foreign exchange.
He stated that many marketers buy from the Dangote refinery, and they may have to start selling in dollars if the federal government and the Dangote refinery as well as other local refineries do not reach an agreement on the Naira-for-Crude arrangement.
“I was taken aback (by the announcement by Dangote), I thought that we had forgone that era whereby the issue of the Naira had been settled between the federal government and Dangote. However, it had a specific period for which it would run so that they be able to test run the validity.
“It is quite unfortunate that after the federal government has stabilized the Naira to crude issue, we are still talking about it again.
“…as marketers if we are going to be buying petroleum products in dollars, it means that we will also sell in dollars. Because we must pass the bulk to the final consumer. Whatever happens in the distribution chain goes to the pump,” he said.
It will put pressure on FX
Ukadike also emphasizes the impact of the development on foreign exchange. The value of Naira has been depreciating in recent weeks.
“So it will really put pressure on Naira. It’s not good for our economy,” Ukadike said.
The IPMAN spokesperson told Nairametrics that marketers are “perturbed” by Dangote’s decision to start selling petroleum products in dollars.
“Are we going to buy in dollars, sell in Naira and then convert again to dollars to go and buy, we are not conversion centers. So I believe it is very pertinent to address that issue. If not, it will further degrade our Naira and put serious pressure on the foreign exchange.”
NNPC as alternative
While he expressed optimism that the Naira-for-crude arrangement would be revisited and Dangote refinery would rescind its decision, he hopes that the Nigeria National Petroleum Company Limited (NNPCL) would continue to sell petroleum products to marketers in Naira.
“If NNPC would sell to us in Naira, we will also buy in Naira. But I am hopeful that it will be resolved soon,” he said.
What you should know
- Earlier this week, the Dangote Petroleum Refinery announced a temporary halt in the sale of petroleum products in Naira, citing an imbalance between its sales proceeds and crude oil purchase obligations, which are denominated in U.S. dollars.
- The company explained that its Naira-denominated sales have exceeded the value of Naira-priced crude it has received so far. As a result, it decided to temporarily align its sales currency with its crude procurement obligations.
- The announcement was made days after the expiration of the Naira-for-crude arrangement between the federal government and local refineries, in which local refineries are supplied crude oil in the local currency.
