Afrigather The Impartial Petroleum Producers Group (IPPG) has expressed issues concerning the Nigeria authorities’s resolution to promote crude oil in naira to Dangote Refineries and different native refineries within the nation.
President Bola Tinubu had given the Nigerian Nationwide Petroleum Firm (NNPC) an approval to promote crude to native refineries in naira, starting from October 1 however the oil marketer says the transfer could be counter productive.
Abdulrazak Isa, chairman of the IPPG, articulated the group’s apprehensions in an announcement issued to Gbenga Komolafe, CEO of the Nigerian Upstream Petroleum Regulatory Fee (NUPRC).
 conscious of strategies and proposal to promote crude in Naira, that is inconsistent with the legislation,” he acknowledged. “And can additional put a materially important pressure on the efforts of the Authorities to handle the Naira as it should cut back Nigeria’s FX receipts from its highest FX income earner – the oil and gasoline business, which is a big supply of the Nigerian Authorities’s royalty and revenue taxes earnings (PPT, CIT and HT) which are denominated in US {Dollars}.”<br />.<br />The IPPG additionally highlighted the complexities associated to current contractual obligations. </p>
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Nigerian oil producers, together with NNPC Restricted, are sure by mounted provide contracts and ahead sale contracts with worldwide merchants.
In response to the group, these agreements, important for securing the financing crucial for upstream investments, is perhaps jeopardised if the federal government enforces native crude gross sales underneath the brand new directive.
Citing Nigerian legislation, Isa stated, “any provide of crude oil to a refinery even underneath a DCSO umbrella is required to be on a keen purchaser and keen vendor foundation.
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“That is the place of the principal legislation that can not be derogated by regulation or guideline.
“Moreover, all producers (together with NNPC Restricted) are at present beholden to both mounted provide contracts or ahead sale contracts to worldwide merchants who’ve stepped in to fill the financing hole to fund upstream investments since worldwide finance establishments have lowered their funding positions to fossil fuels due primarily to ESG necessities.
“These contractual preparations have turn out to be the required collateral obligations for producers (together with NNPC Restricted) and thus they at present have contractual rights to producers’ barrels of crude oil.
“As well as, crude cargoes are usually bought at the least three (3) months upfront and due to this fact your current letters to a few of our members acquired in August mandating DCSO volumes from July to December 2024 are usually not achievable, notably as most, if not all, of the cargoes from July to October will have already got been bought.”
The IPPG chairman warns that any unilateral resolution requiring members to provide crude to native refineries with out regard for current authorized frameworks may result in breaches in worldwide contracts.
The Dangote Petroleum Refinery, poised to be one of many largest oil refineries on the earth, is central to Nigeria’s technique to turn out to be self-sufficient in petroleum merchandise.
Whereas promoting crude in naira to this mega-refinery might sound helpful when it comes to nationwide foreign money utilization, the entrepreneurs warn towards ignoring the broader implications on the international change market and worldwide commerce relations.
“This FX scarcity could be acutely felt provided that NNPC Restricted has engaged in (and is at present advertising) a collection of Ahead Sale Agreements which imply future revenues are being secured towards upfront funding,” he stated.
