The supply of crude oil in naira to the Dangote Petroleum Refinery by the Nigerian National Petroleum Company Limited is to last for six months in the first instance, pending a further review by the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency.
Multiple sources from the committee and the Dangote refinery confirmed on Monday that the naira-for-crude deal would last six months in the first phase because crude oil, being an international product, is priced in dollars.
Meanwhile, Bloomberg reported Monday that the Federal Government was set to deliver up to 400,000 barrels of Nigerian crude oil daily to the Dangote refinery.
The report said the development is expected to take place over the next two months, amounting to 24 million barrels of Nigerian crude oil supply between October and November 2024.
Also on Monday, oil marketers declared that they had yet to receive any information from NNPC and the Dangote refinery as regards the alleged halt of NNPC as the sole off-taker of the petrol produced by the Lagos-based refinery.
There were reports on Monday that NNPC was no longer the sole off-taker of petrol from the Dangote refinery. NNPC and Dangote did not confirm this despite several attempts by our correspondents to get their responses on the matter.
While the alleged halt of NNPC as the sole off-taker of Dangote petrol trended in the oil sector on Monday, some depots stopped the sales of products in their tanks, awaiting a possible hike in the price of petrol.
This, however, did not happen, as neither NNPC nor the Dangote refinery confirmed the claim. The depots that earlier stopped sales eventually resumed operations after some hours.
Also on Monday, the Independent Petroleum Marketers Association of Nigeria revealed that the NNPC portal used for the purchase of petrol had been opened to IPMAN members by the national oil company.
The portal had earlier been shut to IPMAN members, depriving them of access to pay for products. But on Monday, the independent marketers revealed that the portal had been opened.
Naira-for-crude deal
Several sources said the naira-for-crude deal is to last for six months. They also stated that the product is still being expected by the Dangote refinery.
“We’ve realised that many Nigerians are excited that the government has agreed to the naira-for-crude deal, but most people don’t know that the deal is to last six months in the first instance,” an impeccable source at the Dangote refinery who spoke in confidence due to lack of authorisation to speak on the matter, stated.
On Saturday the Federal Government said it had commenced the sales of crude oil and other refined products in naira. The Federal Ministry of Finance disclosed this in a post on its X handle.
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.”
Last month, the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency announced that the Federal Executive Council under the leadership of President Bola Tinubu had approved the sale of crude to local refineries in naira and the corresponding purchase of petroleum products in naira.
“From October 1, NNPC will commence the supply of about 385kbpd (385,000 barrels per day) of crude oil to the Dangote refinery to be paid for in naira,” the committee had declared.
The government explained in September that the naira-for-crude initiative would help reduce pressure on the naira, eliminate unnecessary transaction costs, and improve the availability of petroleum products across the country.
However, sources stated on Monday that the deal would not last forever.
“The deal is for six months in the first instance. People shouldn’t think it is forever. This is a dollar-based business, so supplying it in naira though at the equivalent dollar rate is significant. The President should be commended for this.
“Otherwise, the local crude would have been purchased from foreign-based traders who often mark up their prices and this has its effect on the cost of producing refined commodities whether in Nigeria or elsewhere,” a senior official at Dangote refinery stated.
A member of the committee on crude sales in naira also corroborated the position, stating that “the deal is for six months in the first instance and would be reviewed when the need arises.”
This came as Bloomberg reported that the Federal Government was set to deliver up to 400,000 barrels of Nigerian crude oil daily to the Dangote refinery.
According to cargo allocations reviewed by Bloomberg News, Dangote’s increasing reliance on local feedstock will disrupt the Atlantic oil market by substantially decreasing Nigeria’s crude exports.
The 650,000 barrels per day plant — larger than any other in Africa or Europe — will claim 13 to 14 shipments from Nigeria’s typical monthly programme of about 50 cargoes.
The West African crude market is set to be “substantially tighter” in the fourth quarter because of the supply to Dangote, said Ronan Hodgson, a London-based analyst at FGE.
The volumes could even send Nigerian exports below one million barrels a day, he said.
Some shipments over the next two months may not be delivered as planned, and October’s list includes two cargoes already delayed from September.
Still, the scheduled volume is significantly larger than the average 255,000 barrels a day of Nigerian oil taken in by Dangote over the first half of the year as it gradually ramped up processing, data compiled by Bloomberg show.
