FG Panel reconvenes Monday over naira-for-crude crisis

The huge allocation of crude oil by the Nigerian National Petroleum Company Limited to its foreign creditors is a big challenge to the supply of the commodity to domestic refiners including the Dangote Petroleum Refinery.

Insiders familiar with the development said the national oil firm had allocated large volumes of crude to its foreign creditors to settle the loans acquired by the firm, making it difficult to sustain the naira-for-crude deal between NNPCL and Dangote refinery.

However, multiple sources from the Federal Ministry of Finance and the Federal Ministry of Petroleum Resources confirmed on Thursday that the Technical Sub-Committee on the Naira-for-Crude Policy should reconvene on Monday to deliberate on the matter.

It was gathered that the committee had mandated the Nigerian Upstream Petroleum Regulatory Commission to come up with options that would be reviewed by the panel as it struggles to return the naira-for-crude deal.

This came as oil marketers declared on Thursday that they would seek alternatives following the suspension of the sale of petroleum products in naira by the Dangote refinery.

On Wednesday, the Dangote refinery announced that it had temporarily halted the sales of petroleum products in naira as the naira-for-crude talks between it and NNPCL appeared to have failed.

However, an insider familiar with the workings of the naira-for-crude panel told one of our correspondents that the transaction would not be halted permanently. The source, who spoke in confidence due to lack of authorisation to speak on the matter, pointed out that NNPCL had issues with crude availability.

“From all indications, the scheme won’t end. The sticking point is the issue of crude availability, with NNPC claiming it has pre-sold large volumes of crude,” the official stated.

Asked to state when the naira-for-crude panel would meet again, the source replied, “The committee agreed to reconvene on Monday (next week) to review options that NUPRC has been mandated to come up with. The committee is trying to dimension solution options.”

Last week The PUNCH exclusively reported that the committee met at the Ministry of Finance Headquarters in Abuja to assess developments and reaffirm commitments to the policy framework.

The meeting had in attendance the Minister of Finance and Coordinating Minister of the Economy, Wale Edun (who joined virtually), the Executive Chairman of the Federal Inland Revenue Service, Dr Zacch Adedeji, the Chief Financial Officer of the Nigerian National Petroleum Company, and the Executive Commissioner of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (who also joined virtually).

Others were the Special Adviser to the Minister, Nana Ibrahim, the Coordinator of NNPC Refineries, as well as representatives from the Nigerian Upstream Petroleum Regulatory Commission, the Central Bank of Nigeria, Dangote Petroleum Refinery, and NNPC Trading Ltd.

According to our source, the NNPC presented a crude delivery report detailing the volume of crude oil allocated for domestic refining under the policy. However, the talks did not lead to crude supply in naira, which made the Dangote refinery announce on Wednesday that it would stop petrol sales in naira.

Marketers plan alternatives

Marketers of petroleum products said they will explore other alternatives if the Dangote refinery insists it would no longer sell petrol in naira.

The marketers said stakeholders are putting efforts in top gear to handle ’surprises’ that may follow the suspension of naira petrol sales by the Dangote refinery.

They disclosed that they will consider the NNPC and other local refineries while also importing fuel into the country.

Dangote refinery stopped the sale of petroleum products in naira on Wednesday.

“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.

Immediately after the announcement, the cost of loading petrol at private depots in Lagos jumped to about N900/litre. It was less than N850/litre before the announcement.

In an interview with one of our correspondents on Thursday, the National President of the Petroleum Products Retail Outlet Owners Association of Nigeria, Billy Gillis-Harry, said the market is preparing for alternatives to handle what he called surprises.

“The market is making preparations for any surprises. So, if there are surprises, we’ll have alternatives to go to,” Gillis-Harry stated.

The PETROAN boss expressed hope that the issues between the Dangote refinery and the Federal Government would be resolved soon, saying the masses cannot go back to the days of fuel scarcity.

“We do hope that all of this will be resolved in no distant time and we should get back to normal.

We’re already enjoying the availability of petroleum products. So we must have all that put into consideration,” he said.

On the surprises that may occur, he said, “The surprises are that we may be told to start buying products at dollar-denominated rates. We may be told to do a direct conversion, but Dangote did not tell us how business will go forward. All that they said is just a suspension. So, we hope that they will change their focus and we’ll see how it works.”

Speaking about the possible alternatives, Gillis-Harry recalled calling for diversification in the downstream sector, stressing that there must be different sources of petroleum products supply.

“We will make sure that we have different sources of petroleum products. So, if one source is creating difficulty, then we have to look at other sources.

“One of the alternatives is the NNPC. We have also talked about some of the other refineries that are upgrading to 25,000 metric tonnes per day like the Azikel refinery in Bayelsa. And then, importation is also going to be in the mix.

“So we’ll then look at what is best suited in the market and what can make sure that we have a price that is affordable,” Gillis-Harry maintained.

When told that the prices of petroleum products are going up already, the retailer said this would be resisted.

“PETROAN will resist anything that is going to be giving us challenges. Nobody should take advantage of situations negatively. So, we will explore all possibilities and get the best for all,” he submitted.

The NNPC, which is in charge of supplying crude oil to Dangote refinery neither confirmed nor denied Dangote’s claim that it had been buying crude oil in dollars.

NNPC spokesman, Olufemi Soneye, Soneye insisted that the company had maintained its stance on supplying crude for local refining based on mutually agreed terms and conditions.

“As I have repeatedly stated, NNPC remains committed to supplying crude for local refining based on mutually agreed terms and conditions. Additionally, the NUPRC has disclosed that all local refining companies collectively produce less than 50 per cent of our national consumption. You can do the Maths,” he stated.

In his advice, the Vice President of the Independent Petroleum Marketers Association of Nigeria, Hammed Fashola, appealed to the Federal Government not to stop the naira-for-crude deal.

“I would like to advise the FG to look into the agreement with Dangote again to maintain the tempo of the prices of petroleum products. The masses today are happy with the drop in petrol prices. But just a few hours later, the private depot owners started reacting to the Dangote press release by reviewing their prices upward.

“On Tuesday we closed with N825 to N826, but on Wednesday afternoon, prices started increasing again to N835 to N836 per litre. I will appeal to the FG to continue supplying crude to Dangote and other local refiners to maintain stability in the sector,” Fashola said.