Experts insist Tinubu’s intervention too little amid inadequate crude supply
By Jeph Ajobaju, Chief Copy Editor
Oil industry experts have stressed the directive given by President Bola Ahmed Tinubu to the Nigerian National Petroleum Company Limited (NNPPC) to sell crude in naira to local refineries will not end the challenges in the industry or those of Dangote Refinery built to produce fuel at 650,000 barrel per day (bpd).
Tinubu took the decision at the Federal Executive Council (FEC) meeting on July 29 that crude be sold in naira to Dangote Refinery and other local refineries to end the dollar liquidity problem they encounter.
Tinubu’s spokesman Bayo Onanuga clarified on X (Twitter) the decision is meant to stabilise the pump price of refined petroleum and dollar-naira exchange rate.
He said 450,000 barrels of crude meant for domestic consumption would be sold in naira to local refineries with Dangote Refinery as a pilot.
This becomes expedited as “Dangote Refinery currently requires about 15 cargoes of crude oil at about $13.5bn yearly. NNPC has committed to supply four,” Onanugua added.
Reactions of experts
0il industry experts listed below expressed mixed views on the implications of the presidential directives on the economy, as chronicled by Daily Post.
Ameh Madaki (BBH Consulting Managing Partner and Public Interest Advocacy Network (PIAN)
“[Selling crude in naira to local refiners] will not solve Dangote Refinery’s crisis because the country has no spare crude oil to sell to any refinery. With all their forward sale contracts, there is barely any production from the current 1.2 million barrels a day to sell to anyone.
“The only policy which will make some sense is to sell the crude oil for domestic consumption at the wellhead cost of production.
“Otherwise, we will be chasing shadows and people will be pocketing millions of dollars in fraudulent subsidy payments.”
Joseph Eleojo (energy expert)
“Where is NNPCL getting the crude to sell to Dangote and other refineries from? This goes to tell Nigerians why the local refineries have not worked for 35 years.
“The decision to sell crude to Dangote in naira is a wonderful decision as it will lessen the pressure on Dangote and the other refineries from sourcing FX [foreign exchange] to buy crude.
“Nigerians should not expect drastic price discounts because crude oil is sold to the local refineries in naira.”
Diran Fawibe (International Energy Services Group Chairman)
“It is a good decision on the part of the Federal Executive Council and the President.
“About 3,000 to 4,000 bpd have been allocated to domestic refines, which has been the case for many years based on the capacity of Nigeria’s refineries. It makes a lot of sense to approve crude oil sales to Dangote Refinery and other local refineries in naira.
“This will assist the refinery to price its products properly for the benefit of Nigeria. Hitherto, crude has not been sold in naira.
“The indirect benefit is that petrol import with the operation of Dangote Refinery will be reduced. Similarly, the FX used for fuel import will be reduced to a reasonable extent.
“This will benefit the FX market. You can imagine if there is no fuel in the country, even the queue we are currently experiencing may reduce. I expect that a Naira crude oil price regime will impact sustainable product pricing in Nigeria and stem the importation of fuel.”
Muda Yusuf (Centre for the Promotion of Private Enterprise {CPPE} Director General
“This is surely a welcome development and will go a long way to easing the current pressure of pricing of petroleum products in Nigeria, especially given the capacity of Dangote Refinery.
“The major challenge now is the capacity of NNPCL to supply the crude. It is one thing to give a liberal payment condition (paying for crude in naira), it is another thing to make the crude available.
“I think this remains a major challenge. If the NNPCL can make the crude available for Dangote Refinery and other local refineries, it will be a great idea.
“The benefits will be transmitted to the citizens in terms of more supply of petroleum products, and moderation in the prices of the products.
“Because we are in a situation where we worry about the cost of living, social stability, economic development, and the issue of production; in all these things, access to energy is central. It is paramount that NNPCL can provide the crude.”
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