The federal executive council (FEC) has approved a proposal by President Bola Tinubu directing the Nigerian National Petroleum Company (NNPC) Limited to sell crude oil to Dangote Petroleum Refinery and other refineries in naira.
In a statement on X, Bayo Onanuga, special adviser on information and strategy to the president, said the African Export-Import Bank (Afreximbank) and other settlement banks in Nigeria will facilitate the trade between Dangote and NNPC.
FEC approved the proposal on Monday during a meeting presided over by Tinubu.
“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,” Onanuga said.
“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.”
Onanuga said the intervention will eliminate the need for an international letter of credit, further saving the country of dollar payments.
Zacch Adedeji, executive chairman of the Federal Inland Revenue Service (FIRS), said the sale of byproducts from Dangote refinery to distributors will also be conducted in naira.
“And what does it mean to our economy? One, the pressure on foreign exchange will be reduced,” Adedeji said.
He said as of Monday, Nigeria spends between 30 percent to 40 percent of foreign exchange on the importation of petrol consumed by the country.
According to Adedeji, “monthly, we spend roughly $660 million in this exercise and if you analyse that will give us $7 .92 billion annually”.
“With this approval today through FEC led by Mr President, this has reduced by minimum of 90 percent. Because what we have today, the transaction will now be down in our local currency not only to Dangote Refinery but to all local refineries for all our local consumption and this will actually stabilise the pump price,” he said.
“This will also make economic stability a reality because will no longer reality on the fluctuation in forex. Once again, this is an innovation of solving our problem as a country today.”
Adedeji said with the new approval, the foreign exchange spent on petrol will be reduced to a maximum of $50 million per month, rounding up to $600 million annually.
“This is total reduction of 94 percent and saving us $7.32 billion,” Adedeji said.
“This will also reduce finance costs, which today stands at $79 million. When you consider opening letter of credit between those local refineries and what happens.
“And also, council has approved the settling bank to be Afriximbank. It will be the lead arranger between NNPC and Dangote Refinery.
“So, this is a major innovation in solving Nigeria’s problem permanently. Not only will will have more employment but we will definitely be in charge of one of our main stay of our economy.
“So I congratulate the council members, Mr. President, and also congratulate the operator, the NNPC and Dangote refinery and also the lead arranger, Afriximbank because kudos should go to the President of the African Export-Import Bank (Afreximbank), Prof. Benedict Oramah, for Aramco for these initiatives, because these are people that work behind the scenes to make sure that what we witnessed today, happened.”
The approval for Dangote refinery and NNPC to trade in naira followed the dispute between the refiner, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
On June 4, Aliko Dangote, the founder of Dangote Group, said some international oil companies (IOCs) were struggling to supply crude to his refinery.
Speaking on Arise TV on July 15, Gbenga Komolafe, chief executive officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) described the claim as “erroneous” as the Petroleum Industry Act (PIA) has provisions that guide willing buyer-willing seller transactions.
On July 17, the management of Dangote Industries Limited (DIL) insisted that IOCs are frustrating its request to purchase crude feedstock for the refinery.
Also, Farouk Ahmed, chief executive officer (CEO) of NMDPRA, on July 18, said local refineries, including the Dangote refinery, produce inferior products compared to the ones imported into the country.
Dangote denied the allegation by testing diesel from his refinery on July 20 when federal lawmakers visited the plant.
The billionaire also called for a probe into the allegations made by the NMDPRA.
On July 22, the lawmakers launched investigations into Ahmed’s claim.
They said allegations that the IOCs in Nigeria are frustrating the survival of the Dangote refinery will also be probed.
On the same day, Heineken Lokpobiri, minister of state petroleum resources (oil), held a meeting with Dangote, Ahmed, Gbenga Komolafe, CEO of NUPRC, and Mele Kyari, group CEO of NNPC, to resolve the dispute.
A day after, the house of representatives asked the federal government to suspend Ahmed over “unguarded comments”.
