By Adeyemi Adekunle
To stabilize fuel prices and the exchange rate between the dollar and the Naira, President Bola Tinubu has announced a strategic initiative to bolster the Dangote Refinery. Under this new proposal, the Nigerian National Petroleum Corporation (NNPC) will sell crude oil to the Dangote Refinery in Naira, providing a significant economic boost and operational support to the refinery.
The Federal Executive Council (FEC) approved President Tinubu’s proposal today, marking a significant shift in the country’s approach to managing its oil resources and economic stability. The proposal’s centerpiece involves selling crude oil to Dangote Refinery and other upcoming refineries in local currency rather than dollars. This initiative is expected to mitigate the volatility of fuel prices and protect the Naira’s value against the dollar.
“This decision marks a new era in Nigeria’s economic strategy,”President Tinubu stated during the announcement. “By trading in Naira, we can stabilize our currency and reduce the immense costs associated with importing refined fuel.”
The Dangote Refinery, a crucial player in Nigeria’s oil industry, currently requires 15 shipments of crude oil annually, amounting to a staggering $13.5 billion. The NNPC has committed to providing four of these cargoes, a crucial lifeline for the refinery’s operations.
To facilitate this transition, the FEC has agreed to allocate 450,000 barrels of crude oil for local consumption. These barrels will be offered to Nigerian refineries in Naira, with the Dangote Refinery serving as the initial test case.
The exchange rate for these transactions will remain constant, ensuring price stability and predictability for the refinery’s operations.
Afreximbank and other Nigerian settlement banks have pledged their support for the trade between Dangote and NNPC Limited.
By removing the requirement for international letters of credit, these banks will streamline the transaction process and result in substantial cost savings for the country.
This initiative is expected to significantly reduce Nigeria’s expenditure on importing refined fuel, which has historically drained billions of dollars from the national treasury.
The government’s strategic shift towards supporting local refineries with domestic resources underscores a renewed focus on self-reliance and economic stability.
As the first shipment of Naira-denominated crude oil is prepared for delivery to the Dangote Refinery, industry stakeholders and economic analysts are closely watching the unfolding developments.
