The Federal Government and Dangote Refinery are set to resume talks on the Naira-for-Crude policy, just as the refinery begins importing 12.6 million barrels of crude oil. This development comes after a key meeting between government officials, the Technical Sub-Committee on the Naira-for-Crude Policy, and Dangote representatives was postponed due to the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) unreadiness.
Background of the Naira-for-Crude Policy
The Naira-for-Crude policy aims to allow local refiners to purchase crude oil in Naira, reducing the country’s reliance on foreign exchange. However, the plan hit a snag as refiners sell fuel in Naira but still buy crude oil in US dollars ¹.
Dangote Refinery’s Crude Oil Importation Plans
Dangote Refinery has already started importing crude oil, with 654,766 metric tonnes brought in over three days. The refinery requires approximately 680,000 barrels of crude oil daily, which translates to 20.4 million barrels monthly. At an average price of $70 per barrel, the total cost for six months could reach $8.56 billion.
Implications of the Naira-for-Crude Policy Failure
The failure of the Naira-for-Crude policy has led to:
- Increased Fuel Prices: Fuel prices have started rising, with some filling stations in Abuja and Lagos increasing petrol prices to N940 per litre.
- Economic Fallout: Industry experts warn that this crisis could hurt the government politically and economically.
- Uncertainty in Nigeria’s Refining Sector: Modular refineries like Walter Smith, Aradel, and Duport are struggling, while others like Clairgold and Azikel are still under construction ¹.
Future Talks and Possible Resolutions
The resumed talks between the FG and Dangote Refinery aim to address the challenges facing the Naira-for-Crude policy. Possible resolutions include ² ³:
- Supply of Crude Oil: The Federal Government is preparing to supply up to 400,000 barrels of Nigerian crude oil daily to the Dangote refinery under a Naira-for-Crude agreement.
- Extension of Local Currency Crude Sales: Nigeria’s state-owned NNPC is negotiating with the Dangote refinery to extend local currency crude sales.
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