4 hours Ago
For the downstream sector of our petroleum industry, it is a sigh of relief as the Federal Government has reaffirmed the continuation of supply of crude oil to our domestic refineries in Naira rather than Dollar payments.The policy, which was authorised by the Federal Executive Council, FEC, in October last year, was disrupted in March this year, barely after six months. The Technical Sub-Committee on the Crude and Refined Products Sales in Naira met last week and issued a statement affirming the Federal Government’s “full commitment to the implementation of this strategic initiative”.
The Committee assured that it is a permanent arrangement designed to “support local refining, bolster energy security, and reduce reliance on foreign exchange in the domestic petroleum market”. The brief stoppage of the arrangement had raised fears that it could be part of an attempt to arm-twist Dangote Refinery amidst its market cold war with the Nigerian National Petroleum Company Limited, NNPLC.It was a worrisome damper on the euphoria following Nigeria’s full recovery of domestic refining capacity, which was absent for the best of the past 30 years despite several expensive, failed turnaround maintenance of government refineries.
The Naira-for-Crude policy is a win-win for all. If our refineries are left to source foreign exchange in order to stay in business, it will hamper smooth operations and worsen the foreign exchange crunch. Our refineries will be more vulnerable to shocks in the international energy market, and the hope for the gradual reduction of the price of refined products in the domestic market may remain unrealised.
The Federal Government should redouble efforts to ensure we meet our average Organisation of Petroleum Exporting Countries, OPEC, daily production quota of 2.2 million barrels per day. This will enable us to keep this policy running with minimal interruption and clear the backlog of crude oil mortgaged to government’s external creditors.
We also call on the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, to ensure that crude oil is equitably available to all existing and oncoming domestic refiners. More effort should also be made to monitor crude allocations to ensure they are not secretly and fraudulently sold for foreign exchange. NMDPRA has its job cut out for it now that Nigeria is rapidly becoming once again a notable hub of petroleum refining and marketing.
The Naira-for-Crude scheme is a poorer copy of what we clamoured for down the years. We had called for the supply of crude to our local refineries at subsidised prices to enable them sell to the domestic market at lower prices to boost productivity.However, since the Federal Government insists on total deregulation and subsidy removal, the Naira-for-Crude option is the next best thing.
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