NNPC to Supply Crude Oil to Dangote Refinery in Naira Starting October 1, 2024, Amid Concerns from Modular Refineries
On September 29, 2024, the Technical Sub-Committee on Domestic Sales of Crude Oil confirmed that the Nigerian National Petroleum Company Limited (NNPC) will begin supplying crude oil to the Dangote Petroleum Refinery in naira starting October 1, 2024. This initiative follows the Federal Executive Council’s approval on September 13, 2024, under President Bola Tinubu’s administration to facilitate crude sales and petroleum product purchases in local currency.
The NNPC is set to supply approximately 385,000 barrels per day (kbpd) of crude to the Dangote refinery, translating to about 11.5 million barrels monthly. In return, the refinery will provide equivalent volumes of refined diesel and petrol to the domestic market, also priced in naira.
Zacch Adedeji, the chairman of the Technical Sub-Committee and head of the Federal Inland Revenue Service, emphasized the significance of this plan for Nigeria’s economy. “The implementation of this agreement is crucial for the benefit of Nigerians,” he stated.
The initiative aims to alleviate pressure on the naira, reduce transaction costs, and enhance the availability of petroleum products nationwide. The arrangement entails that while diesel will be sold in naira to various off-takers, petrol (PMS) will be sold exclusively to NNPC, which will then distribute it to marketers.
To ensure smooth implementation, the committee is establishing a one-stop shop to coordinate services from various regulatory and security agencies. The technical committee will transition into an execution and monitoring body operating out of Lagos for the next three to six months.
However, modular refineries have expressed concerns about being excluded from this arrangement. The Crude Oil Refinery-owners Association of Nigeria’s Publicity Secretary, Eche Idoko, noted that the committee is currently only engaging with Dangote refinery, and modular refineries are facing severe crude supply challenges, hindering their production capabilities.
As the start date approaches, there are hopes that the naira-based crude sales will help lower petrol prices. The Dangote refinery, which began selling petroleum products on September 15, has refrained from disclosing pricing details, denying claims of selling at N898 per litre to NNPC. The company urged the public to await an official announcement regarding pricing.
In response to the ongoing pricing disputes, the Federal Government has reiterated its non-interference stance, maintaining that the petroleum sector operates under deregulation.
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