The Federal Executive Council FEC has instructed the NNPC to sell crude oil to local refineries, including the Dangote refinery.
The Special Adviser to the President on Revenue, Dr. Zacch Adedeji, explained that the directive was given because the Dangote Refinery is now approaching a steady state of operations.
He mentioned that the refinery would need approximately 15 crude cargoes per month, which amounts to an annual supply cost of 13.5 billion dollars.
Additionally, the NNPC has committed to supplying four crude oil cargoes monthly, leaving the remainder to be sourced from international traders.
He explained that to manage the significant foreign exchange needs for local refineries and petroleum marketers, it was proposed that local refineries’ crude oil purchases from NNPCL be denominated in NGN at a fixed exchange rate for a minimum period of six months.
The benefits, according to Dr. Adedeji reduce foreign exchange pressure, as the previous scenario utilised USD 660 million per month, totaling USD 7.92 billion annually.
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By the proposed scenario, he said expenditures were projected to decrease to USD 50 million per month, equating to USD 600 million annually, which will significantly alleviate the pressure on foreign exchange reserves, leading to an annual savings of 7.32 billion dollars, representing 94%.
He said such would stabilize petroleum product prices, saying that stabilizing petroleum prices will likely drive the appreciation of the Naira, as petroleum imports account for 30% of Nigeria’s foreign exchange demand.
He noted that stable petroleum prices would lower transportation costs, reduce food price inflation and positively impact interest rates and Dollar-Naira exchange rates.