Stakeholders warn, NNPC forcing Dangote Refinery to buy and sell fuel in dollar by stopping naira-for-crude policy is dangerous
By Jeph Ajobaju, Chief Copy Editor
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” Dangote Refinery announced on Wednesday.
It explained in a statement that the decision to temporarily halt the sale of petroleum products in naira is to avoid a financial mismatch between sales proceeds in naira and crude oil purchase obligations denominated in dollar.
Dangote Refinery said the sale of products in naira would resume when it receives allocation of naira-denominated crude cargoes from the Nigerian National Petroleum Company Limited (NNPC).
Stoppage of the naira-for-crude policy contradicts affirmation by Zacch Adedeji, the Chairman of Technical Sub-Committee on Domestic Sales of Crude Oil and Refined Products in Naira, that the arrangement with local refineries has not been ended.
Adedeji, who also chairs the Federal Inland Revenue Service (FIRS), said after implementing the policy for months, evidence abounds that it is the right way to go and it will continue to help the economy.
Stakeholders have expressed concern that local fuel sale in dollar by Dangote Refinery could disrupt the pricing dynamics in the market which has recently seen decline in pump prices – and that would trigger negative macroeconomic implications.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) said it could mean selling petroleum products in dollar and the Centre for the Promotion of Private Enterprise (CPPE) described the news as a “disturbing development.”
Muda Yusuf (CPPE Chief Executive Officer)
“It will significantly change the dynamics of domestic petroleum products pricing,” he told The Nation.
“The sustainability of the widely celebrated deceleration of petroleum products prices is now evidently at risk. We may see a reversal of the trend.
“There are other macroeconomic implications. For instance, the demand pressure on the foreign exchange (forex) market would be elevated, resulting in an exchange rate depreciation scenario.
“The foreign reserves may come under pressure. All of these could result in adverse macroeconomic outcomes with profound implications for investors’ confidence.”
Abubakar Maigandi (IPMAN National President)
“If you look around, prices of commodities are already stabilising; this is partly a function of the stable and declining petrol price we have been enjoying. But with this development, it will affect the stability in prices of commodities.
“As at today (Wednesday), depot owners in Lagos sold to marketers at N835 per litre, compared to N815 per litre we used to buy from Dangote before the stoppage of sales to the domestic market in naira by the refinery.”
Maigandi warned that IPMAN may be left with no option than to flow with the tide because its members “will sell what it buys.”
Chinedu Ukadike (IPMAN National Public Relations Officer)
“Well, this latest development, if actually it will be implemented, will definitely put pressure on the dollar because it may now become a local exchange. It is not a very good for independent marketer.
“So, we want to appeal to federal government to continue to give Dangote products in naira so that it will not put pressure on the dollar. Any moment from now, the dollar will be going up. And once the dollar goes up, it will bring unnecessary inflation, excruciating inflation, which is not good for our energy security.”
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