The Federal Government has reached an agreement with the Dangote Petroleum Refinery for the rollout of Premium Motor Spirit (PMS), commonly known as petrol, in September 2024. This development is part of a broader plan to begin selling crude oil to local refineries in naira starting from October 1, 2024.
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, announced the agreement during a meeting of the Implementation Committee in Abuja. The committee was established to oversee the transition to crude oil sales in naira.
“The first PMS delivery from Dangote is expected next month under existing agreements,” stated Dr. Zacch Adedeji, the Executive Chairman of the Federal Inland Revenue Service and Chairman of the Technical Sub-Committee.
The agreement follows a decision by the Federal Executive Council (FEC) on July 29 to stop the sale of crude oil to local refineries in foreign currency. Instead, 450,000 barrels of crude oil designated for domestic consumption will be sold in naira, starting with the Dangote refinery as a pilot project. The move aims to stabilize the pump price of fuel and the exchange rate between the dollar and naira.
Edun emphasized the importance of transparency in the implementation process and directed the Technical Sub-Committee to finalize the details and prepare a report for the President.
“The minister confirmed that his directives are on track for implementation from September,” a statement from the finance ministry read.
Local refineries, including the Dangote Refinery, have previously expressed challenges in accessing crude oil for their operations. The Crude Oil Refiners Association of Nigeria (CORAN) has been advocating for a crude supply contract to help bring their refineries to full operation.
Eche Idoko, the Publicity Secretary of CORAN, expressed optimism that the sale of crude in naira would lower the cost of petrol and strengthen the naira against the dollar.
“This is a positive step, but we are asking for a crude supply contract to support those refineries that are currently at the Authority To Construct and construction stages,” Idoko said.
The Dangote Refinery, which has a capacity of 650,000 barrels per day, has faced difficulties in securing crude oil. The management of Dangote Group has accused International Oil Companies (IOCs) of frustrating crude supply to its refinery by insisting on selling through foreign agents.
This has led to higher prices, with cargoes being offered at $2 to $4 per barrel above the official price set by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
“The IOCs seem to be prioritizing sales to Asian countries over local refineries,” the Dangote Group alleged.
Meanwhile, the Arewa Consultative Forum (ACF) has expressed support for the Dangote Petroleum Refinery amidst the ongoing controversies. In a statement issued by its National Publicity Secretary, Prof Tukur Muhammad-Baba, the ACF described the refinery as a source of national pride and commended Aliko Dangote for his vision and patriotism.
“The ACF delegation, which visited the facility on July 30, 2024, was impressed by its sophisticated quality testing and control laboratories, which meet and surpass global industry standards,” the statement read.
The Federal Government’s decision to sell crude oil to local refineries in naira is expected to have a significant impact on the country’s economy, particularly in terms of fuel pricing and the stability of the naira. The successful implementation of this policy could also alleviate some of the challenges faced by domestic refiners, ensuring a steady supply of crude oil and supporting the growth of the local refining industry.