Kelvin Emmanuel has lauded the federal government’s Naira-for-crude sale agreement, allowing the Nigerian National Petroleum Corporation (NNPC) to sell petroleum to local refineries, including the Dangote Refinery in naira.
Emmanuel in an interview with ARISE NEWS on Sunday, described this move as a step in the right direction towards economic stabilisation and more efficient management of Nigeria’s petroleum pressure on the country’s foreign exchange market.
The Minister of Finance, Wale Edun, has earlier made the announcement of the Naira-for-crude sale agreement via the ministry’s X account on Saturday.
Emmanuel highlighted the importance of the naira-based crude oil swap arrangement, stating that the global system for pricing Premium Motor Spirit (PMS), also known as gasoline, necessitates an adaptive approach for Nigeria and by denominating crude oil sales in naira, Nigeria can better align its pricing structure with domestic economic realities while still participating in the global oil market.
He further noted that the agreement involves the government supplying the Dangote Refinery with about 385,000 metric tonnes of crude oil as feedstock, while the refinery will still need to source an additional 265,000 metric tonnes from other suppliers to meet its total production capacity.
“It is a step in the right direction and it is in line with the law. It is very important because when you look at the framework for pricing of PMS, you will see that there is a global system for pricing gasoline all over the world. What this naira based crude swap arrangement basically says, according to what I have seen, is that the government is basically providing feedstock to the Dangote refinery in naira, at an agreed upon exchange rate. I think the starting amount is about 385,000 metric tonnes. He still has 265,000 metric tonnes he still needs to source from other areas.
“So what it does basically, is that it provides a framework where both the refinery and the government agree on certain amount of PMS, that is the value of the crude oil that is delivered to the refinery, that will be provided to Nigeria, to help with the backward integration efforts and it will also relieve the pressure on the naira because before this arrangement, we have seen that the demand for fx to import crude oil has affected the foreign exchange market. So, this is really going to over the next quarter of 2024, relieve some pressure. How much pressure, I am not sure yet.”
Emmanuel pointed out that, prior to this deal, the demand for foreign exchange to import crude oil had significantly impacted the value of the naira and with this new framework, the government and the Dangote Refinery have a clearer roadmap for determining the volume of PMS to be supplied to Nigeria, equating to the value of crude delivered to the refinery.
When asked whether this policy could result in a stronger naira and an overall economic boost, Emmanuel raised concerns about the ongoing importation of PMS despite the Dangote Refinery’s operational status. According to records, in September 2024, the NNPC imported 814,000 metric tonnes of PMS into Nigeria, translating to about one billion liters of the fuel.
This ongoing reliance on PMS imports has sparked questions about the logic behind continuing to bring in foreign petroleum when Nigeria now has a functional refinery capable of producing PMS domestically.
Additionally, Emmanuel questioned the quality of some of the imported PMS, noting that some shipments were substandard. He urged the Nigerian government to reconsider its current import practices, especially when there is potential to reduce the country’s dependency on foreign refined products and support local production through refineries like Dangote’s.
“At the same time when the government negotiated an arrangement with the Dangote refinery to swap crude oil for pms, records show that for September deliveries, NNPC imported 814,000 metric tonnes of PMS into Nigeria. That translated to about 1 billion liters of PMS. Does it make sense for the government to continue to import pms into Nigeria? And the question of quality has come in because some of that PMS is substandard. The question we now have to put back to the Nigerian government will be “why are you importing PMS when you have a functional refinery in Lagos?”
Chioma Kalu
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