Lagos, Nigeria — In a significant development for Nigeria’s oil sector, the Nigerian National Petroleum Company Limited (NNPCL) has delivered 30 million barrels of crude oil to the Dangote oil refinery, with plans to add 17 million barrels in the near future. This move is part of the Federal Government’s initiative to bolster local refineries and reduce reliance on imported petroleum products.
Upcoming Deliveries and Government Policy
NNPCL is set to continue its support for the Dangote refinery by supplying an additional 6.3 million barrels of crude oil in September, followed by another 11.3 million barrels in October. The September shipment will be spread across seven cargoes. This initiative aligns with the Federal Government’s policy to sell crude directly to local refineries, aiming to strengthen domestic refining capabilities and reduce foreign exchange pressure.
Concerns Over Fuel Pricing
Adedapo Segun, Executive Vice President of NNPCL Downstream, voiced concerns regarding the current state of fuel pricing. He criticized the fact that NNPCL remains the sole importer of Premium Motor Spirit (PMS), calling the situation “anomalous” and stressing that fuel prices should be determined by market forces rather than by a single entity. Segun’s remarks highlight a broader debate over the transparency and efficiency of Nigeria’s fuel pricing system.
NNPCL’s Role and Market Conditions
Segun clarified that NNPCL’s role as the exclusive importer was a response to reduced participation from other market players, not an attempt at monopolization. He underscored the need for more favorable market conditions, including a more liquid foreign exchange market, to ensure a stable fuel supply and equitable pricing. Segun suggested that extensive economic reforms might be necessary to address these issues effectively.
Collaborative Efforts and Government Approval
NNPCL’s collaboration with private refineries, such as Dangote, is a key part of ensuring a steady supply of crude oil. The Nigerian government has recently approved NNPC Ltd to sell crude oil in naira, which is intended to alleviate the pressure on foreign exchange rates. This policy shift will also allow local refineries and marketers to transact in naira, potentially stabilizing the currency and easing the financial burden on the oil sector.
Dangote Refinery’s Production and Challenges
The $20 billion Dangote refinery, Nigeria’s largest and expected to be Africa’s biggest when fully operational, began production in January. Despite this, the refinery has struggled to secure enough crude to meet its daily production capacity of 650,000 barrels. Dangote has previously had to rely on costly international oil imports due to difficulties accessing locally produced crude. The refinery’s complaints about oil majors’ pricing practices and supply issues have highlighted the challenges faced by local refineries.
Cabinet Decision and Future Outlook
In response to these challenges, the Nigerian cabinet has authorized NNPC Ltd to begin selling both crude and refined fuels in naira to local refineries and marketers. This decision is aimed at reducing the upward pressure on foreign exchange rates and supporting the growth of Nigeria’s domestic oil refining industry.
The developments underscore a pivotal moment for Nigeria’s oil sector, balancing domestic support with broader economic reforms to enhance stability and efficiency in the market.
