ABUJA – President Bola Tinubu has approved the sale of crude oil to indigenous refineries, including the Dangote Refinery, in naira. This directive aims to alleviate pressure on Nigeria’s foreign exchange reserves and stimulate the local economy.
Zacch Adedeji, the Executive Chairman of the Federal Inland Revenue Service (FIRS) and Special Adviser on Revenue to the President, announced this decision following a Federal Executive Council (FEC) meeting led by President Tinubu.
Adedeji explained that the Nigerian National Petroleum Company (NNPC) Limited has been instructed to implement this change immediately. “The President’s directive is a strategic move to localize solutions for Nigeria’s economic challenges,” Adedeji stated.
Economic Benefits
Adedeji emphasized the significant economic benefits of this policy, highlighting that Nigeria currently spends between 30% and 40% of its foreign exchange on importing Premium Motor Spirit (PMS). “Monthly, we spend roughly $660 million on this, amounting to $7.92 billion annually,” he noted.
With the new policy, this expenditure is expected to decrease dramatically. “This approval will reduce our foreign exchange spending by at least 90%. Transactions will now be conducted in naira, not only with Dangote Refinery but also with other local refineries for domestic consumption, stabilizing pump prices and enhancing economic stability,” Adedeji added.
Implementation Details
The FIRS chairman also outlined the financial mechanics of the new system. “We are reducing our monthly foreign exchange expenditure from $660 million to a maximum of $50 million, saving $7.32 billion annually,” he said. This shift will also lower financing costs associated with opening letters of credit.
Afreximbank will serve as the lead arranger for transactions between NNPC and Dangote Refinery. “This innovative approach is a major step towards solving Nigeria’s economic problems permanently, creating employment, and strengthening our economic infrastructure,” Adedeji remarked.
Strategic Interventions
Further details reveal that the Dangote Refinery is approaching steady-state operations, with NNPC Limited committing to supply four crude oil cargoes monthly. The remainder will be sourced from international traders, a practice currently conducted in USD, placing a strain on Nigeria’s foreign currency liquidity.
To stabilize the naira exchange rate and restore price stability, the government has proposed that local refineries purchase crude oil from NNPCL in naira at a fixed exchange rate for at least six months. Refined products will also be sold to approved local petroleum marketing companies in naira at the same fixed exchange rate.
Adedeji concluded by praising the collaborative efforts that led to this policy shift, including contributions from the African Export-Import Bank (Afreximbank) and its President, Prof. Benedict Oramah. “This is a major innovation in addressing Nigeria’s economic challenges, and we commend all involved parties for their efforts,” he said.
