In a significant development for Nigeria’s petroleum industry, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has finalized an agreement between the Nigerian National Petroleum Corporation (NNPC) Limited and Dangote Refinery to sell crude oil in local currency, the naira. This agreement comes on the heels of the Dangote Refinery commencing petrol production.
The decision to sell crude oil to Dangote Refinery in naira aligns with a recent approval by the Federal Executive Council (FEC). This move is seen as a strategic step towards ensuring Nigeria’s energy security and reducing its dependence on foreign exchange.
Dangote Refinery to Supply 20 Million Liters of Petrol in September
NMDPRA has confirmed that Dangote Refinery has begun producing petrol, with an initial output of 20 million liters expected in September. The refinery plans to increase this production to 30 million liters per day by October 2024.
A Boost for Naira Stability
The agreement between NNPC and Dangote Refinery is expected to have a positive impact on the naira. Aliko Dangote, the CEO of Dangote Refinery, has stated that the deal will reduce pressure on foreign exchange by at least 40%. This is due to the reduced demand for dollars in the market as a result of the naira-denominated transactions.
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A Strategic Move to Stabilize Fuel Prices
The agreement between NNPC and Dangote Refinery is also expected to contribute to the stabilization of fuel prices in Nigeria. By reducing the reliance on foreign exchange for crude oil purchases, the government can potentially lower the cost of refined fuel products.
Previous Government Approval
The FEC’s approval of President Tinubu’s proposal to sell crude oil to local refineries in naira was announced in July 2024. The decision to start with Dangote Refinery as a pilot project reflects its significant role in Nigeria’s petroleum industry.
If You Ask Me
The agreement between NNPC and Dangote Refinery presents a win-win situation for Nigeria. It promotes local content, reduces foreign exchange pressure, and supports the growth of the domestic petroleum industry. As the Dangote Refinery ramps up production and supplies more fuel to the local market, it is expected to contribute to addressing the country’s fuel scarcity challenges.
The finalization of the agreement between NNPC and Dangote Refinery to sell crude oil in naira marks a significant milestone for Nigeria’s petroleum industry. This strategic move aligns with the government’s efforts to ensure energy security, reduce dependence on foreign exchange, and stabilize fuel prices. As the Dangote Refinery continues to expand its operations, it is poised to play a vital role in meeting Nigeria’s domestic fuel needs and promoting economic growth.
