The Nigerian National Petroleum Company Limited (NNPC) and Dangote Petroleum Refinery are finalizing on an agreement that involves selling crude oil in naira to the refinery and buying back refined petroleum products in naira.
This deal, which aims to bolster the local economy by minimizing reliance on foreign exchange, could be finalized as early as next week, according to Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited.
During a recent session hosted by Nairametrics on X, Edwin explained that NNPC has expressed interest in monitoring the production process at the Dangote refinery, given that it will supply the crude oil.
Edwin said, “Now we are still discussing with the government to give us the crude in naira. The discussions have been going on. It has not yet been concluded. When we buy the crude from them in naira, they will take the products back from us in naira, that’s where we are. We are still in discussions.
“So now whatever we are producing, they will buy back from us. In fact, NNPC has told us they will have a team of six to 10 people permanently stationed inside our refinery. They even told us we should give them office space because they are going to give the crude.
“They are going to monitor the production and then they will buy it back in naira. So, this is where we are and we are waiting for the conclusion of the discussions. Hopefully, by next week, if it gets concluded, we can kick off.”
Edwin stated that the President of Dangote Group, Alhaji Aliko Dangote, was the one who insisted on dealing with the Nigerian government in naira because of the foreign exchange challenges confronting the country.
“When it came to petrol, we told the Presidency that if we were going to continue to import crude, our cost of production would be high and of course, our quality is very high. So, we will continue to export and manage the business. Then they sat with us and said, ‘Okay, we will try and give you crude allocation and you please produce and sell to us the products which you are producing out of the crude’. We said, yes.
“Then they said, can you sell it in naira? We said, no, we are a free zone company. We will be normally selling in dollars. They said, no, the country is in acute scarcity of dollars. So, please, we will supply the crude to you in naira. Sell the product to us in naira. Though internally, including me, some of us objected to the idea. My president clearly said we are going to accept this because the country is badly in need of foreign exchange.
“The currency value is dropping every day. Yes, I know I am going to take a loss because by the time we sell it in naira and convert it to dollars, (we are not even getting the dollars). By the time we convert, the currency may become weaker. So, we know he (Dangote) is going to lose. He said, I’m willing to take the loss in the interest of the country. I don’t mind, but the country is in bad shape. Somebody has to take certain risks. I’m willing to face the loss to whatever extent it is. So, that is how we agreed,” Edwin explained.
The Federal Government had previously announced that crude oil sales to local refineries, including Dangote, would begin on October 1, 2024.
This initiative was confirmed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during a recent meeting with the Implementation Committee, which was established to manage the transition to naira payments for crude oil transactions.
