Afrigather The latest directive by President Bola Ahmed Tinubu, sequel to a deliberation of the Federal Government Council (FEC) that the Nigerian Nationwide Petroleum Firm (NNPC) Restricted ought to start to promote crude oil to Dangote Refinery and different upcoming refineries in Naira bodes nicely for the Nigerian financial system. FEC needed to undertake a proposal to this impact, following the raucous prevarications and mudslinging that attended the buildup to Dangote Refinery’s graduation of rolling out of gas (Petroleum Motor Spirit,….CONTINUE READING THE ARTICLE FROM THE SOURCE
PMS) from its crops in Lekki, Lagos. Seemingly, the nearer the Dangote Refinery bought to its definitive graduation of PMS manufacturing date (in August 2024), the extra heated the brouhaha and ding dong between high executives of the corporate and the Federal Authorities—represented by the management of related oil business regulatory businesses. This unwholesome scenario apparently has led to the Dangote Refinery, because it started the refining of diesel earlier within the yr, to resort to importation of crude from such far-flung locations as United States and Brazil. And the corporate has been paying closely in greenback phrases. In opposition to this backdrop, the Presidential order for crude oil in Nigeria to now be bought to Dangote Refinery and different native refineries is most auspicious and might be a recreation changer within the financial turnaround efforts of the Federal Authorities. It’s because for a number of years now, Nigeria has been relying on nearly 100 per cent imported PMS for all its native wants. This has ensured not solely the continued ‘demise’ of current refineries within the nation, but additionally constituted an enormous drain on the general public until—in greenback phrases.
Beneath the rising association, AfreximBank and different settlement banks in Nigeria will facilitate the commerce between Dangote and NNPC Restricted. This intervention will eradicate the necessity for worldwide letters of credit score and save Nigeria billions of {dollars} yearly spent on importing refined gas.
Particularly, Government Chairman of the Federal Inland Income Providers (FIRS), Zach Adedeji, who was on the FEC assembly, stated “the sale of crude oil to Dangote Refinery in Naira will cut back stress on native refineries,” including that “about US$660 million (about N7.92 billion) is spent to obtain crude, which pressures the nation’s overseas trade reserves. The brand new measures goal to scale back this by 90 per cent,” he stated
Earlier than this important determination by Mr. President who can be the substantive Minister of Petroleum Assets, there was lots of throwing of brickbats and uncertainty about what is going to turn into of the Dangote Refinery. Though former President Muhammadu Buhari commissioned the Refinery in Might 2023, it solely started refining diesel and different merchandise early in 2024. Nevertheless, it wanted a gradual and bigger provide of crude oil enter to begin the manufacturing/provide of PMS.
Sadly, the efforts of the corporate to achieve a take care of Nigerian producers of crude oil was hardly yielding any outcomes, resulting in a number of rescheduling of provide of PMS from the refinery. Neither the Nigerian Nationwide Petroleum Firm (NNPC) Restricted nor the worldwide oil firms (IOCs) confirmed eagerness to provide Dangote Refinery the badly wanted feedstock (crude oil). This example bought so unhealthy that the administration of Dangote Refinery needed to accuse the IOCs within the nation of organized sabotage.
Particularly, Devakumar Edwin, Vive-President, oil and fuel, at Dangote Industries Restricted (DIL) reportedly accused the IOCs in Nigeria of “doing every little thing to frustrate the survival of Dangote Oil Refinery and Petrochemicals.” Edwin stated the IOCs have been intentionally irritating the refinery’s efforts to purchase native crude by jerking up crude oil costs above the market worth, thereby forcing it (the refinery) to import crude from nations so far as the USA, with attendant big prices.
Along with this, Edwin additionally lamented the exercise of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), which he accused of “granting licenses indiscriminately to entrepreneurs to import soiled refined merchandise into the nation.” He additional lamented that “the Federal Authorities issued 25 licenses to construct refineries and we’re the one one which delivered on promise,” saying “in impact, we deserve each help from the Authorities.”
The DIL chief stated: “the IOCs are eager on exporting the uncooked supplies (crude oil) to their dwelling nations, creating employment and wealth for his or her nations, including to their GDP, and dumping the costly refined merchandise into Nigeria, thus making us rely upon imported merchandise.” He regretted this situation, saying that “sadly, Nigeria additionally performs into the fingers of the IOCs by persevering with to problem import licenses on the expense of our financial system.”
It’s towards this backdrop that the Presidential order for the NNPC to start to promote crude to Dangote Refinery and different native refineries in Naira might be seen to have come on the nick of time. That is additionally as a result of a big chunk of Nigeria’s scarce overseas trade (FX), a few third of what’s provided to the market, often goes to importation of refined merchandise.
Actually, it has been the near-total dependence on importation of those (refined) merchandise, sustained by the licensing of extra importers that exacerbated the unintended detrimental results of gas subsidy removing since Might 2023. The cumulative demand for FX by PMS importers has steadily ensured that demand for foreign exchange far outstripped the provision within the FX market. This results in additional crashing of the Naira towards the greenback ceaselessly.
The continued upsurge within the costs of crude oil within the worldwide market in a number of months had often pushed up costs of the refined merchandise. This, in flip, resulted into increased touchdown price of the imported PMS into Nigeria—resulting in constant stress for will increase within the pump worth of the product. And this has led to both scarcity/shortage of gas or climbing of its costs in numerous places throughout the nation.
This actually has since sparked and sustained suspicion within the thoughts of the Nigerian public that one way or the other the Federal Authorities had recommenced paying ‘subsidy’ to the PMS importers/entrepreneurs. Even with this, the pump worth of PMS has saved rising, starting from N700 per liter to over N1000 per liter in numerous components of the nation. This has continued to maintain rising price of intra- and inter-city transportation.
The development has additionally fed into rising prices of foodstuffs, items and providers. All these have been reflecting within the subsisting hyperinflationary development within the nation—evidently largely pushed by the excessive and rising costs of meals.
As Dangote Refinery begins to get regular provide of crude from inside Nigeria, and pays in Naira, it’s almost definitely that this may decrease its price of operation. Sequel to this, the Dangote Refinery producing and supplying PMS cheaper than hitherto would very probably start to trigger drop in the price of transportation; costs of meals; and value of dwelling typically.
It should nevertheless be said that the Presidential order for the sale of crude in Naira to native refineries has additionally saved the nation from avoidable embarrassment within the comity of oil producing nations. Particularly, given Nigeria’s rating amongst African crude producers and the Group of Petroleum Exporting International locations (OPEC), it’s infra dig for the nation to be unable to fulfill the crude enter want of just some native refineries. And Dangote Refinery is the one one among notable capability; others are small modular refineries.
Certainly, Dangote Refinery’s resort to importing crude from overseas had sadly put an enormous query mark on the nation’s long-hyped crude oil manufacturing/exporting capability. This lack of capability has considerably additionally uncovered the precarious state of the oil sector in Nigeria. In latest occasions, the oil exploration and manufacturing (E & P) enterprise has been buffeted by a myriad of challenges, together with the weird phenomenon of huge oil theft.
Barring sudden glitches (administrative or technical), the help and encouragement of the Federal Authorities (which the crude gross sales in Naira connotes) to Dangote Refinery has the capability to jumpstart the nation’s financial turnaround. This help additionally challenges the Authorities and its forms to promptly restream the prevailing refineries in Warri, Kaduna and Port Harcourt. This won’t solely checkmate the emergence of any monopoly within the refined merchandise market but additionally meaningfully drive the financial progress of the nation.
