The Nigerian National Petroleum Company Limited (NNPC) is set to begin supplying crude oil in naira to the Dangote Petroleum Refinery this week, following the Federal Government’s announcement that the naira-for-crude initiative has officially started. This new development marks a significant shift in how crude oil is traded domestically, with expectations that it will reduce pressure on the naira and enhance the availability of petroleum products across Nigeria.
In addition to this, three modular refineries are gearing up to start the production of Premium Motor Spirit (PMS), commonly known as petrol. The refineries are Aradel, located in Rivers State with an 11,000-barrel-per-day capacity, Clairgold in Delta State with a 20,000-barrel capacity, and Azikel in Bayelsa, which has a capacity of 12,000 barrels per day. Officials confirmed that these refineries are in different stages of preparation and are set to contribute to the local production of petrol, potentially reducing Nigeria’s dependence on imported fuel.
At the $20 billion Dangote Refinery in Lagos, the supply of crude oil in naira is expected to begin this week. An official from the refinery, speaking anonymously, mentioned that although discussions on the supply deal are still ongoing, there is optimism that the first delivery will happen soon. The source stated, “The deal is still a work in progress and I’m sure that by this week the committee should be done with it.”
The naira-for-crude initiative is part of the Federal Government’s efforts to support the local economy and improve energy supply. In a post by the Ministry of Finance on its X (formerly Twitter) account, it was revealed that this policy took effect on October 1, 2024.
The statement read, “The Minister of Finance and Coordinating Minister of the Economy announced that, in line with the Federal Executive Council directive, the sale of crude oil and refined petroleum products in naira has officially commenced as of October 1, 2024.
“Following a meeting of the Implementation Committee, chaired by the Minister of Finance on October 3, 2024, to conduct a post-commencement review of the Crude Oil and Refined Products Sales in Naira initiative, the commencement of this strategic initiative was affirmed by key stakeholders.”
The Dangote refinery will receive crude in naira and, in exchange, provide petroleum products, including petrol and diesel, to the domestic market, all to be paid for in naira. The NNPC will be the sole off-taker of PMS from Dangote and will then distribute it to local marketers. The deal is expected to last for six months during the initial phase.
This initiative has been welcomed by various stakeholders, including the Crude Oil Refinery Owners Association of Nigeria and the Petroleum Retail Outlet Owners Association of Nigeria. However, they have requested that the government release more details on the agreement. The president of PETROAN, Billy Gillis-Harry, noted, “It will be a great thing for us to know the details and its implementation. However, we are happy with the deal and congratulate everyone involved.”
The government believes that this initiative will not only help stabilize the naira but also ensure that local refineries have access to crude oil, potentially ending the country’s reliance on imported petrol. The three modular refineries mentioned earlier are expected to join the Dangote refinery in the production of petrol, marking a significant milestone in Nigeria’s energy sector.
NNPC’s initial lifting of petrol from the Dangote refinery began in mid-September, with about 102.9 million litres being dispatched during the second half of the month. However, the volume fell short of the 400 million litres initially expected, indicating a slower start to the refining and distribution process.
