Mohammed Manga, Director of Information and Public Relations of Federal Ministry of Finance, echoed the announcement by Wale Edun, Finance Minister and Co-ordinating Minister of the Economy, that Nigeria commenced selling crude petroleum to local refineries and petroleum products to marketers in Naira.
Manga’s gleeful statement read in part: “In line with the Federal Executive Council (FEC) directive, the sale of crude oil and refined petroleum in Naira has officially commenced as of October 1, 2024.” This innovative and daring move of President Bola Tinubu’s government deserves commendation.
Manga added: “The strategic initiative and bold step taken by the President Bola Tinubu-led administration is expected to have a lasting impact on Nigeria’s economy, fostering growth, stability, and self-sufficiency, especially as the country continues to navigate the complexities of global markets. This strategic move positions Nigeria for success in the years to come.”
The positives are many: The first advantage is that the 40 per cent of foreign exchange dedicated to paying for imported petroleum products is no longer necessary. That appreciably reduces the pressure on the Naira, if those who gobble up Nigeria’s forex do not invent other consumer products to fritter it away.
Also, the cost of transporting crude petroleum for refining abroad, returning refined petroleum products back home, and the high cost of labour and other overheads in the refining countries, are also eliminated or substantially reduced, if Nigeria’s petroleum is refined locally.
Another (quick fix) advantage of local refining of crude petroleum is the employment opportunities it will generate for Nigerian youths who are pounding the streets looking for analogue jobs that have been erased by digital technology.
But these positives will remain mere speculation if Dangote and other local refineries do not get crude petroleum to refine. Recently, Festus Osifo, an engineer, and President of both the Trade Union Congress and Petroleum and Gas Senior Staff Association of Nigeria, hinted as much.
He asserts that priority off-takers from Nigeria’s oil fields are the International Oil Companies, who are joint venture partners of Nigerian National Petroleum Company Limited, and are entitled to about 40 per cent of production. Next are lenders, like AFREXIM BANK, that Nigeria Extractive Industries Transparency Initiative says must receive 272,500 barrels of petroleum daily.
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If the requirements of other domestic modular refineries are discounted, local refineries will require roughly 1.2 million barrels of petroleum daily, if NNPCL’s four petroleum refineries join Dangote Refinery to refine petroleum. And after the IOCs take 800,000 barrels, hardly anything is left for other local refineries, or even for NNPCL to sell to earn foreign exchange to finance importation.
Osifo’s explanation that NNPCL’s voluntary undertaking as monopsony off-taker of Dangote Refinery’s petrol production is intended to re-sell at a discounted price to marketers who will sell at a lower rate, suggested the return of subsidy. His reference to fluctuating price of petroleum seemed to justify the return of subsidy.
If government wants to re-introduce subsidy, which NNPCL accountants cheekily refer to as “under-recovery of costs,” they should declare so, and Nigerians will know what to expect. Not to come clean aggravates the trust deficit of government.
The flip-flop that Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), asking NNPCL to farm out its refineries, and then turning around to deny saying so is disappointing. If Minister Lokpobiri, the President, who is Minister of Petroleum Resources, and the folks at NNPCL will like to know, it might be wise to consider selling or farming out the refineries.
But the news that NNPCL has vacated the monopsony role to allow marketers buy petroleum products directly at Dangote’s price, and probably sell at a price to be determined, not by the Invisible Hand of the market forces, but by the government, is confusing.
If subsidy is truly gone, government must look for another way of tinkering with the Invisible Hand so that supply can exceed demand, and the price of petrol will “naturally” drop. One good way to achieve this is for government to have strategic reserves of crude petroleum and petroleum products, from where strategic releases can be made to tweak the market price. We are not talking about inventory at NNPCL’s 21 depots.
That is how to avoid effects of two critical fluctuations: The price of crude petroleum in the international market and Naira’s exchange rate to the American dollar, the currency of the business of petroleum that we are told by NNPCL officials is an “international citizen.”
In all, petroleum for Naira is a step in the right direction. But government must work out modalities to deliver regular supply of petrol to Nigerians at an affordable price. Otherwise, everything would be sheer waste of time. Bureaucracy and corruption must not be allowed to kill this bright and novel idea.
