Nigeria will save $7.92bn annually from the sale of crude oil in naira to refineries in the country, the Federal Government disclosed yesterday.
President Bola Tinubu had yesterday directed the Nigerian National Petroleum Company Limited (NNPCL) to sell crude in the naira currency to Dangote refinery and other local refineries, effective immediately.
The government’s directive is aimed at easing foreign exchange pressure on the economy.
Special Adviser to the President on Revenue, Zacch Adedeji, disclosed this when he joined ministers to brief State House correspondents at the end of the Federal Executive Council, FEC, meeting presided over by President Tinubu at the Council Chamber, Presidential Villa, Abuja.
*‘Dangote refinery, others to get 450,000 barrels meant for domestic consumption
Adedeji, who is also the Chairman of the Federal Inland Revenue Service, FIRS, said, “To ensure the stability of the pump price of refined fuel and the dollar-naira exchange rate, the Federal Executive Council today adopted a proposal by President Tinubu to sell crude to Dangote Refinery and other upcoming refineries in Naira.
“Dangote Refinery at the moment requires 15 cargoes of crude, for $13.5bn yearly. NNPC has committed to supply four.
“But the FEC has approved that the 450,000 barrels meant for domestic consumption be offered in naira to Nigerian refineries, using the Dangote refinery as a pilot. The exchange rate will be fixed for the duration of this transaction.
“Afreximbank and other settlement banks in Nigeria will facilitate the trade between Dangote and NNPC Limited. The game-changing intervention will eliminate the need for international letters of credit. It will also save the country billions of dollars used in importing refined fuel.”
He further said, “Mr President is thinking outside the box to solve Nigeria’s problem and actually to localise the solutions to Nigeria’s problem.
“He has approved through the Council that effective immediately, NNPCL get engaged with local refineries and we are starting that with the Dangote Refinery that the sales of crude oil to Dangote Refinery be denominated in naira and also the sales of by-products from Dangote Refinery to distributors also be conducted in naira, and what does it mean to our economy? One, the pressure on foreign exchange will be reduced.”
The FIRS boss added, “With this approval today through FEC led by Mr President, this has been reduced by a minimum of 90 per cent. Because of what we have today, the transaction will now be down in our local currency not only to Dangote Refinery but to all local refineries for all our local consumption and this will stabilise the pump price.
“This will also make economic stability a reality because there will no longer rely on the fluctuation in forex. Once again, this is an innovation of solving our problem as a country today.”
He said that about $660m is spent weekly on fuel importation amounting to about $7.92bn every year, revealing that with the directive the denomination of transactions will stabilize the pump price and make the economic predictability reliable.
“Just to be specific, in terms of benefits, one which is major is the reduction in foreign exchange pressure. We utilise $660m per month, totalling $7.92bn annually. With the new approval that we have, this will reduce to a maximum of $50m per month which is annualised to be only $600m. This is a total reduction of 94 per cent and saving us $7.32bn.
“The intervention will eliminate the need for international letters of credit and also save the country billions of dollars used in importing refined fuel.”
He further said, “This will also reduce finance costs, which today stands at $79m. When you consider opening letters of credit between those local refineries what happens?
“And also, the Council has approved the settling bank to be AFREXIM. It will be the lead arranger between NNPCL and Dangote Refinery.
“So, this is a major innovation in solving Nigeria’s problem permanently. Not only will we have more employment but we will be in charge of one of the mainstay of our economy.
“So, I congratulate the council members, Mr President, and also congratulate the operator, the NNPC and Dangote Refinery, and also the lead arranger, AFREXIM Bank because kudos should go to the President of the African Export-Import Bank, Prof Benedict Oramah, for these initiatives, because these are people that work behind the scenes to make sure that what we witnessed today, happened.”
