Extension of the sale of crude in Naira to local refineries will form the plank of discussions at a meeting of the Federal Government Committee on the issue today in Abuja.
Mounting challenges facing the policy which has pitted the National Petroleum Company Limited (NNPCL) and the Dangote Refinery and Petrochemicals, prompted the committee overseeing the initiative to convene the meeting.
Stakeholders will hold talks on how to sustain the arrangement amidst concerns over crude availability and obligations to creditors.
Dangote Refinery, citing low supply of crude in Naira, has threatened to begin sale of refined product to marketers in dollar.
Before then, there were insinuations that the sale of crude in Naira would end by the end of this month, but a member of the committee, Zack Adedeji, said the sale will last beyond six months.
The committee, which is chaired by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, is expected to assess options presented by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in a bid to prevent a potential breakdown of the deal that allows local refiners, led by Dangote Petroleum Refinery, to buy crude oil in local currency.
Inside sources that the NUPRC was tasked by the committee to develop strategies to address the growing difficulties around the transaction, which was initially lauded as a strategic step to reduce Nigeria’s foreign exchange pressure and support local refining capacity.
On the table for discussion today is the challenge facing the Nigerian National Petroleum Company Limited (NNPCL), which has reportedly committed a significant portion of Nigeria’s future crude production to creditors under various forward-sale arrangements.
This has created tension within the oil sector as the NNPCL struggles to reconcile its obligations to foreign creditors with its commitment under the Naira-for-Crude deal.
A source close to the committee explained that despite the current difficulties, the transaction is not expected to be permanently suspended.
It said: “The meeting is essentially to deliberate on how to salvage the situation, with a focus on how NNPCL can fulfill its obligations to its creditors while also maintaining its commitment to local refiners. It’s about striking a balance,” the source said.
The NNPCL’s current inability to meet its crude supply obligations to local refiners stems from pre-existing deals that have pledged much of the country’s crude output in advance.
“NNPCL had issues with crude availability because it had already committed a significant quantity of the nation’s crude to its creditors ahead of production.”
According to another source at the Federal Ministry of Finance, the Naira-for-Crude arrangement was the result of a Federal Executive Council (FEC) decision, and thus cannot be abandoned casually.
Also billed for discussion today is Nigeria’s oil production quota under the Organisation of Petroleum Exporting Countries (OPEC).
The NNPCL is under pressure to ramp up crude production to meet domestic demand, but has been hesitant to breach the quota allocated by OPEC, citing potential diplomatic and market repercussions.
“NNPCL is under pressure to provide more crude for local refining, but doing so would mean exceeding the OPEC quota. The company is not comfortable with that option,” the source explained.
Exceeding the quota could risk sanctions or strained relations within the OPEC bloc, an outcome the NNPCL is keen to avoid.
