Energy experts in Nigeria’s oil sector have emphasised the transformative impact of the federal government’s new crude procurement policy on the Dangote Petroleum Refinery and the broader energy landscape.
In a recent discussion on News Central TV’s Politics HQ on Wednesday October 8, Dr. Joseph Obele, former Chairman of IPMAN (Rivers State), and political analyst Lanre Toluhi both outlined how the government’s decision to sell crude oil in Naira rather than dollars will significantly influence energy governance and the overall economy.
A Shift Towards Local Feedstock
The Dangote Refinery, one of Nigeria’s largest petroleum processing facilities, is slated to receive up to 400,000 barrels of crude per day over the next two months. In total, the refinery will process approximately 24 million barrels of Nigerian crude in October and November, marking a strategic move towards greater reliance on local feedstock. This effort is part of a broader push to make the refinery more self-sufficient, reducing its previous dependence on foreign oil imports.
This policy shift follows a Federal Executive Council decision on July 29th, which approved a proposal from President Bola Tinubu directing the Nigerian National Petroleum Company Limited (NNPC) to sell crude oil to the Dangote Refinery in Naira. This move is designed to ease pressure on Nigeria’s foreign exchange reserves and allow local refineries to access crude oil without sourcing dollars, a significant change for the country’s oil trade structure.
Economic Benefits of the Naira-for-Crude Policy
Dr. Joseph Obele highlighted how purchasing crude in Naira could benefit both the economy and the refining industry. He noted that, “Policy formulation often brings both positive and negative effects. For example, we saw the consequences of the fuel subsidy removal on May 29th last year when the president announced that ‘subsidy is gone.’ However, this new policy is one that I believe will have a positive effect. The principle of comparative advantage tells us that when you produce domestically, such as refining crude oil, you often achieve better pricing.”
Dr. Obele further explained that by purchasing crude in Naira, Dangote Refinery eliminates the need to source dollars, reducing foreign exchange risks and avoiding the costs associated with importing crude oil from international markets. “This reduction in cost will help mitigate inflationary pressures and reduce unemployment, which are major challenges in Nigeria today,” he added.
Providing a practical example, Dr. Obele noted that at the current exchange rate, crude oil is priced at approximately ₦123,000 per barrel when converted from dollars. However, due to the Naira-based transactions, the final cost will likely be lower, thanks to the elimination of intermediary expenses such as foreign exchange fees and transportation costs.
Job Creation and Foreign Reserve Boost
Lanre Toluhi, sharing his insights on the policy, agreed that the government’s approach would yield significant savings for the country. “This policy will save Nigeria around $10 billion annually, primarily by reducing the need for dollar transactions,” Toluhi explained. These savings could help strengthen the country’s foreign reserves, providing more fiscal stability in the long term.
Additionally, the logistics associated with refining crude oil locally will generate substantial employment opportunities. Toluhi estimated that the new policy could create up to 10,000 direct jobs, particularly in areas like transportation, refining operations, and supply chain management. This influx of jobs is expected to help alleviate some of the country’s unemployment concerns.
A Positive Outlook for Nigeria’s Energy Sector
Both experts agree that this policy shift is a crucial step towards strengthening Nigeria’s energy governance. By relying more on local feedstock and reducing dependence on foreign crude, the country can improve its economic resilience, stabilise its currency, and create employment. However, the long-term success of this initiative will depend on consistent policy implementation and the ability to maintain stable production levels within the local refineries.
This move represents a significant shift in Nigeria’s approach to refining its own crude oil, and the economic benefits could be far-reaching. With a projected 24 million barrels being processed in the next two months, the Dangote Refinery could soon become a cornerstone of Nigeria’s efforts to reduce its reliance on imported petroleum products, thereby supporting national economic growth and stability.
