Nigeria has become a country where both the leaders and the led callously display partial and in most cases total alienation of reasons especially on critical issues that could have been moving us forward as a nation of serious-minded people. The act of wandering or rather deviation from the truth and divergence from the correct and proper ways of doing things is fast becoming our national way of life as a people.
Last year, the Federal Executive Council (FEC) approved the Naira-for-Crude initiative in which local refineries will be supplied crude oil in Naira rather than in dollars.
The shelf life of the first agreement between the NNPCL and domestic refiners, majorly Dangote Refinery, was scheduled to end by March 31st, 2025 as the first phase. The initial schedule was expected to end after six months. So it has ended!
When the Naira- for -Crude deal was first emplaced on October 1, 2024, some of us raised alarm that though it sounded good as a short term palliative but cannot work on long term. It was politically expedient at the time because Nigerians were mounting pressure of President Bola Tinubu as the substantive Petroleum Minister, and the former NNPCL Chief Executive, Mele Kyari, on the needed policy initiative to support the sustainability of the newly-streamed Dangote Refinery and crash the high cost of fuels in the country.
The initiative was also aimed at stabilizing fuel pump prices and the dollar-Naira exchange rate. However, how these had happened is at best blurred and at worst obscured.
In a statement by the NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, the pilot phase of the arrangement was made for six months. This was to clarify allegations in the media that the NNPC unilaterally terminated the Naira-for-Crude contract with the Dangote refinery.
“NNPC Limited has noted recent reports circulating on social media regarding the alleged unilateral termination of the crude oil sales agreement in Naira between NNPC and Dangote Refinery.
“To clarify, the contract for the sale of crude oil in Naira was structured as a six-month agreement, subject to availability, and expires at the end of March 2025.
On March 19, 2025, the Dangote refinery announced a temporary halt to the sale of petroleum products in naira, citing a mismatch between the naira-denominated sales proceeds and its crude oil purchase obligations, which are denominated in US dollars.
“We must temporarily adjust our sales currency to align with our crude procurement currency,” the refinery said in a statement.
“Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in US dollars.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” the firm announced.
Following this announcement, as expected, petrol prices at private depots in Lagos jumped to about ₦900 per litre, from under ₦850 previously. Retail stations across the country quickly followed suit, with prices reaching ₦930 in Lagos, ₦950 in Abuja, and ₦1000 in some northern parts of the country.
Now, truth be told, anybody familiar with the workings of the Nigerian oil industry especially the upstream and mid-stream subsectors would laugh at this Dangote outcry which weighs more on the side of deceit and blackmail than genuine business concerns.
Last time checked, the business transactions and accounting standards in the oil industry remains dollar-based worldwide. This is the global practice. I had warned in one of my analysis last year immediately the deal was instituted that it’s not going to be sustainable because even if the producers/NNPC agree to sell the crude in Naira, it’s still going to be at the prevailing global exchange rate of the local currency to the Dollar. So at the end of the day we’ll still be talking of availability or otherwise of FOREX.
Remarkably, NNPCL has come out to say that “Discussions are currently ongoing towards emplacing a new Naira-for-Crude contract arrangement.”
According to the apex oil concern, the national oil company is committed to supplying crude oil for local refining based on “mutually agreed terms and conditions.”
And this is where the crux of the matter lies! Right from inception of the initiative, there has never been any workable and holistic mutual agreement on “terms and conditions” for the deal. But that’s a talk for another day.
And even if the federal government renews the Naira-for-Crude deal today, it is still a short term palliative.
Every input into oil production is dollar denominated and bringing in Naira into the transactions is an aberration. This is the truth, whether anybody wants to hear this or not.
This is where the real problem is: the IMF ill-advised callous devaluation or more aptly complete destruction of the Naira and the inability of government/NNPCL to fashion out an honest and genuine “Appropriate Pricing” of petroleum products in the country. Until the government decide to take a sincere and urgent action to strengthen the Naira, there won’t be light even at the end of this tunnel!
The NNPC on its own does not even have spare crude to sell to domestic refiners not even to talk of selling in Naira. Every barrel of crude currently produced in Nigeria has been sold FOB by the Buhari people. So what happens today is that we NNPC pumps out oil to pay for monies some people have collected as loans and spent on things that are at best blurred and at worst obscured. That’s the tragedy of the Nigerian situation!
One easy solution would have been for the Federal Government to sell crude oil to local refiners at discounted rate but this is not feasible now as Nigeria is a member of OPEC and doing that would attract sanctions from the oil cartel as it goes against the group’s ethic code.
The NNPC refineries would also have been a cover to address this crude availability for local processing but for the fact that the three and half existing plants in Port Harcourt, Warri, and Kaduna have been deliberately or rather criminally disabled by this same cabal that controls crude sales and products imports.
Corruption, greed, and wickedness by the people who ran our oil business through the years even up till now landed us into this quagmire of not appropriately pegging a right price on petroleum products sold across the country.
And worsening this aberration is the prevailing mindset of the benefiting few that we must continue to import fuels for our domestic use even while the Dangote Refinery is up and running in Lekki, Lagos. Though Dangote has its own share of the blames too!
Is it not curious that these same IPMAN, DAPPMAN and all other MANS have been at the forefront of campaigning in favour of continued importation and their only reason was to checkmate Dangote who has an unholy character trait for monopoly in any sector it forays?
As long as we continue to import products for our domestic use, Nigerians can never enjoy appropriately priced fuel. These fuel importers factor-in all sorts of inanities in their calculations to get the landing costs of fuels particularly petrol, diesel and dual purpose kerosene.
It’s unfortunate that we have government officials who are supposed to be defending our national interests in all these transactions but regrettably in one way or the other, all of them usually get co-opted into the scam or rather crime against the ordinary Nigerians.
There is no way we can ever get real pricing (cheap price) of products if the government continues to allow third-party interests called “Oil/Commodities Traders” run both our crude marketing and products supplies subsector of the nation’s downstream at the same time. This is the truth!
And interestingly, the buck of this aberration ends on the President’s table as he also happens to be the nation’s authentic Petroleum Minister. The tragedy of the situation is that the people in government are already campaigning for 2027 elections making the need of the masses secondary in their thinking. God dey!
(IFEANYI IZEZE writes from Abuja and can be reached on: iizeze@yahoo.com; 234-8033043009)
