Experts caution that President Tinubu’s recent directive to sell crude oil in Naira to Dangote Refinery may not alleviate the refinery’s challenges. While the policy aims to stabilize prices and reduce foreign exchange pressure, analysts highlight concerns about crude supply and operational hurdles.
In a significant policy shift, President Bola Ahmed Tinubu has directed the Nigerian National Petroleum Company Limited (NNPC) to sell crude oil in Naira to Dangote Refinery and other local refineries. The decision, announced during a recent Federal Executive Council meeting, aims to address the crude oil supply crisis affecting local refineries, including the 650,000 barrels-per-day Dangote Refinery.
The administration hopes this move will stabilize fuel prices and ease the burden on the Naira-dollar exchange rate. However, industry experts remain skeptical about the effectiveness of this measure in resolving the challenges faced by the refinery sector.
According to Barr. Ameh Madaki, Managing Partner at BBH Consulting and Convener of the Public Interest Advocacy Network (PIAN), the country lacks sufficient crude oil to meet domestic refinery needs. He pointed out that NNPC’s forward sale contracts have already committed much of Nigeria’s crude production, leaving little for local refineries. “The only viable policy is to sell crude oil for domestic consumption at the wellhead cost of production,” he argued, warning against potential fraudulent subsidy payments.
Similarly, energy expert Joseph Eleojo questioned the practicality of sourcing enough crude for Dangote Refinery and other local facilities. He acknowledged that selling crude in Naira could reduce the financial pressure on these refineries but cautioned that it might not lead to significant price discounts for consumers.
Dr. Diran Fawibe, Group Chairman of International Energy Services Limited, viewed the decision more positively. He noted that selling crude in Naira would help refineries price their products appropriately and potentially reduce the country’s reliance on imported fuel, thereby easing foreign exchange pressure.
Dr. Muda Yusuf, founder and CEO of the Centre for the Promotion of Private Enterprise (CPPE), welcomed the policy but highlighted the challenge of ensuring a consistent crude supply. He emphasized that the benefits of this decision could include increased fuel availability and moderated prices, provided that NNPC can meet the demand.
As the debate continues, it remains to be seen how this policy will unfold and whether it will provide the intended relief to Nigeria’s energy sector and economy.
