To ensure the stability of the pump price of refined fuel and the dollar-Naira exchange rate, the Federal Executive Council Monday adopted a proposal by President Tinubu for the Nigerian National Petroleum Company (NNPC) Ltd to sell crude to Dangote Refinery and other upcoming refineries in Naira.
Dangote Refinery at the moment requires 15 cargoes of crude, at a cost of $13.5 billion yearly. Nigerian National Petroleum Company (NNPC) has committed to supply four cargoes.
But the FEC has approved that the 450,000 barrels meant for domestic consumption be offered in Naira to Nigerian refineries, using the Dangote refinery as pilot. The exchange rate will be fixed for the duration of this transaction.
Afreximbank and other settlement banks in Nigeria will facilitate the trade between Dangote and NNPC Limited. The game changing intervention will eliminate the need for international letters of credit. It will also save the country of billions of dollars used in importing refined fuel.
The 650,000 barrel-per-day refinery, owned by Africa’s richest person, Aliko Dangote, is being used as a pilot for the proposal and may will be extended to other domestic refiners, according to a presidential memorandum .
“Currently, these transactions are conducted in US dollars, significantly straining Nigeria’s foreign-currency liquidity,” according to the memorandum.
Under the proposal approved on Monday, the NNPC will provide four cargoes a month, leaving the remainder to be sourced from international traders.
“This strategy will eliminate government control and drive independence of the market as it aims to eliminate government intervention in the management of domestic petroleum prices, further facilitating competitiveness and allowing for greater market predictability and stability,” the memorandum says.
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