Uncertainty Surrounds NNPCL-Dangote Crude Oil Sale in Naira as Anticipation Grows

Samuel Mobolaji

Unconfirmed reports suggest that the much-anticipated sale of crude oil to the Dangote refinery in local currency may commence this week. Despite the lack of official statements from the Nigerian National Petroleum Company Limited (NNPCL) or confirmation from Dangote regarding the start of these sales, industry insiders express concern over the situation’s feasibility.

The Federal Government’s recent decision to sell crude oil in local currency, rather than the widely used US dollar, follows a trend of countries exploring local currency transactions for oil and gas post the Russia-Ukraine conflict. Mohammed Manga, Director of Information and Public Relations at the Ministry of Finance, stated that the Federal Executive Council (FEC) has mandated crude oil sales be conducted in naira.

This strategic initiative aims to bolster Nigeria’s economic growth, stability, and self-sufficiency amidst the complexities of global markets.

With proven oil reserves of approximately 37 billion barrels—representing 3.1 per cent of global reserves—Nigeria ranks among the top 15 oil-producing nations. The NNPCL had initially planned to start selling crude to the Dangote refinery on October 1.

Coordinating Minister of the Economy, Wale Edun, previously mentioned that the NNPC would supply about 385,000 barrels per day to the Dangote refinery, with payments to be made in naira. The initiative also includes Dangote supplying gasoline and diesel equivalent to the domestic market, also payable in local currency.

While sales will be valued in dollars at prevailing international prices, financial settlements will occur in naira at an undisclosed fixed exchange rate. Notably, maritime and port regulatory costs, typically paid in dollars, will also be settled in naira.

The Nigerian Ports Authority has set up a “one-stop shop” to coordinate service provision from various regulatory and security agencies, ensuring smooth operations for coastal deliveries.

Although Dangote will sell diesel to any interested buyers, gasoline will be sold exclusively to NNPCL for now, reflecting the ongoing government subsidy on gasoline prices.

As the market awaits clarity on the program’s launch, the complexities surrounding the crude oil sales in naira continue to create uncertainty in Nigeria’s oil sector.