In a groundbreaking move to stabilize the pump price of refined fuel and address the volatile dollar-Naira exchange rate, the Federal Executive Council (FEC) has endorsed a landmark proposal by President Bola Ahmed Tinubu. This initiative will see crude oil sold to Dangote Refinery and other forthcoming refineries in Naira, marking a significant shift in Nigeria’s economic strategy.
Currently, Dangote Refinery, a crucial player in Nigeria’s energy sector, requires 15 cargoes of crude annually, which amounts to a staggering $13.5 billion. The Nigerian National Petroleum Corporation (NNPC) has already pledged to supply four of these cargoes. However, the FEC’s approval extends this commitment, stipulating that the 450,000 barrels of crude oil designated for domestic consumption will be offered to Nigerian refineries in Naira, starting with the Dangote Refinery as a pilot project.
This strategic intervention will have a fixed exchange rate for the duration of the transaction, providing a predictable and stable financial environment for the refinery’s operations. The arrangement will be facilitated by Afreximbank and other settlement banks in Nigeria, simplifying the trade process between Dangote Refinery and NNPC Limited. This innovative approach eliminates the need for international letters of credit, a significant barrier in traditional trade.
The implications of this policy are profound. By conducting these transactions in Naira, Nigeria will save billions of dollars previously spent on importing refined fuel. This move not only enhances the financial stability of the domestic market but also strengthens the Naira, reducing the pressure on foreign exchange reserves.
President Tinubu’s bold initiative is set to redefine Nigeria’s energy landscape, providing a sustainable and economically viable solution to the country’s refining needs. The success of this pilot project with Dangote Refinery could pave the way for broader adoption across other refineries, heralding a new era of economic resilience and growth for Nigeria.
