The substantial amount of crude oil allocated by the Nigerian National Petroleum Company Limited to overseas debtors poses a significant challenge for supplying the resource to local refineries such as the Dangote Petroleum Refinery.
Sources close to the matter indicated that the national oil company has assigned substantial amounts of crude oil to its overseas debtors to repay the loans taken by the firm. This situation complicates the arrangement where NNPCL intended to use naira currency for purchasing crude oil destined for the Dangote refinery.
Nevertheless, various sources from both the Federal Ministry of Finance and the Federal Ministry of Petroleum Resources verified on Thursday that the Technical Subcommittee on the Naira-for-Crude Policy needs to regroup on Monday for further discussions on this issue.
It became clear that the committee instructed the Nigerian Upstream Petroleum Regulatory Commission to develop alternatives for review by the panel as they strive to reinstate the naira-for-crude arrangement.
This announcement followed the decision made by oil marketers on Thursday to explore alternative options after the suspension of petrochemical product sales in Naira by the Dangote Refinery.
On Wednesday, the Dangote Refinery stated that it had temporarily stopped selling petroleum products in Nigerian naira since negotiations between them and NNPCL regarding naira-for-crude deals seemed to be unsuccessful.
Nonetheless, someone close to how the naira-for-crude committee operates informed one of our reporters that this deal won’t be completely stopped forever. This individual, speaking anonymously because they weren't authorised to comment publicly, mentioned that NNPC faced challenges regarding the supply of crude oil.
"Based on all available evidence, the program seems set to continue. The main challenge revolves around the availability of crude oil, as the NNPC asserts they have already committed significant quantities," explained the official.
When asked about the next meeting of the naira-for-crude panel, the source responded, "The committee decided to regroup on Monday (of the following week) to evaluate the alternatives that NUPRC has been tasked to propose. They aim to assess various potential solutions."
Last week The PUNCH It was exclusively reported that the committee convened at the headquarters of the Ministry of Finance in Abuja to evaluate recent developments and reassert their dedication to the policy framework.
The gathering included the Minister of Finance and Coordinating Minister of the Economy, Wale Edun (participated remotely), the Executive Chairman of the Federal Inland Revenue Service, Dr Zacch Adedeji, the Chief Financial Officer of the Nigerian National Petroleum Corporation, along with the Executive Commissioner from the Nigerian Midstream and Downstream Petroleum Regulatory Commission (also participated online).
The attendees included Nana Ibrahim, who served as the Special Adviser to the Minister, along with the Coordinator for NNPC Refineries. Additionally, there were representatives present from entities such as the Nigerian Upstream Petroleum Regulatory Commission, the Central Bank of Nigeria, the Dangote Petroleum Refinery, and NNPC Trading Ltd.
As per our information, the NNPC provided a crude delivery report outlining the quantity of crude oil designated for local refining as part of their policy. Nevertheless, these discussions failed to result in crude supplies being priced in naira. Consequently, the Dangote refinery declared on Wednesday that they would cease selling petrol in Nigerian currency.
Marketers plan alternatives
Petroleum product marketers stated they will consider alternative options should the Dangote refinery persist with its refusal to trade petrol in Naira.
The marketers stated that stakeholders are intensifying their efforts to manage 'unexpected issues' that might arise following the halt of naira gasoline sales due to the Dangote refinery operation.
They revealed that they will take into account the NNPC along with other domestic refineries and simultaneously import fuel into the nation.
The Dangote Refinery halted the sale of petroleum products priced in Naira on Wednesday.
Esteemed customers, please be advised that the Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in Nigerian Naira. This measure is being taken to prevent a discrepancy between our revenue from sales and our commitments for purchasing crude oil, which are presently specified in United States Dollars.
"So far, our sales revenue from petroleum products in naira has surpassed the total value of naira-denominated crude oil we have acquired. Consequently, we need to temporarily change our sales currency to match the currency used for purchasing crude oil," the company stated.
Right after the announcement, the price of fueling up at independent stations in Lagos surged to around N900 per litre. Previously, it had been under N850 per litre.
During an interview with one of our reporters on Thursday, Billy Gillis-Harry, who serves as the National President of the Petroleum Products Retail Outlet Owners Association of Nigeria, stated that the market is getting ready to implement alternative strategies to deal with potential unexpected events, which he referred to as "surprises."
"The market is gearing up for potential surprises. Therefore, if there are unexpected events, we will have options to consider," Gillis-Harry noted.
The chief of PETROAN voiced optimism that the disputes between the Dangote Refinery and the Federal Government would be settled shortly, stating that returning to an era of fuel shortages is not feasible for the general population.
We truly hope that everything will be settled soon and we can return to our regular routine.
"We're already benefiting from the presence of petroleum products, so we need to take all of this into account," he stated.
Regarding potential unforeseen events, he commented, "One surprise could be being instructed to purchase goods priced in dollars. There might also be a straightforward conversion, though Dangote hasn’t clarified how businesses should proceed. They only mentioned a temporary halt. Thus, we’re hoping they shift their approach so we can observe how things unfold."
When discussing potential alternatives, Gillis-Harry remembered emphasizing the importance of diversifying within the downstream sector and highlighted the necessity for multiple sources of petroleum product supplies.
We will ensure that we utilize various sources for obtaining petroleum products. Therefore, should one source encounter issues, we can turn to alternative sources.
One alternative is the NNPC. Additionally, we've discussed certain refineries such as the one in Azikel, located in Bayelsa, which are enhancing their capacity to reach 25,000 metric tons daily. Furthermore, imports will continue to play a role.
"So we will assess what fits well in the market and what ensures our prices remain affordable," Gillis-Harry insisted.
When informed that the costs of petroleum products were increasing, the retailer stated that this would face resistance.
"PETROAN will stand firm against any challenge coming our way. No one should exploit circumstances adversely. Therefore, we will examine every option available to achieve the best outcome for everyone," he stated.
The NNPC, responsible for providing crude oil to the Dangote Refinery, did not confirm or deny Dangote’s statement that it had been purchasing crude oil using dollars.
The NNPC spokesperson, Olufemi Soneye, emphasized that the organization has consistently upheld its position regarding the supply of crude oil for domestic refining, adhering strictly to the predetermined terms and conditions.
"As I've emphasized multiple times, NNPC continues to be dedicated to providing crude oil for domestic refining according to mutually agreed upon terms and conditions. Furthermore, the NUPRC has revealed that all local refineries together account for less than half of our country’s total fuel consumption. The numbers speak for themselves," he said.
The Vice President of the Independent Petroleum Marketers Association of Nigeria, Hammed Fashola, advised the Federal Government not to discontinue the naira-for-crude agreement in his counsel.
I recommend that the FG revisit the deal with Dangote to sustain the current levels of petroleum product pricing. The general public is pleased with the decrease in fuel costs. However, within mere hours after the Dangote press release, privately owned depots began adjusting their prices upwards.
"On Tuesday, we concluded at N825 to N826, however, by Wednesday afternoon, the prices began rising once more to N835 to N836 per liter. I urge the Federal Government to keep providing crude oil to Dangote and other domestic refineries to sustain stability within the industry," stated Fashola.
Provided by Syndigate Media Inc. ( Syndigate.info ).
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