Nigeria began selling crude oil to billionaire Aliko Dangote’s new refinery in naira on October 1st. This “oil for naira” scheme aims to ease pressure on the struggling Nigerian currency, the naira, which has lost significant value this year. However, the success of the scheme is uncertain. While Nigerians hope it will reduce fuel prices, a reported disagreement between Dangote and the NNPC raises concerns about its effectiveness.
Easing Pressure on Naira
On Oct. 1, the Nigerian National Petroleum Company Limited (NNPC) reportedly began selling crude oil to billionaire Aliko Dangote’s new refinery in naira. According to a technical committee chaired by the Nigerian Federal Inland Revenue Service (FIRS) Chairman Zacch Adedeji, the NNPC is expected to supply 385,000 barrels per day to the Dangote refinery.
This so-called “crude oil for naira” scheme is expected to lead to the subsequent sale of petroleum products in local currency. The sale of crude oil in naira is intended to ease pressure on the naira, which has depreciated by more than 60% this year.
The naira recently hit a new low against the U.S. dollar after the Central Bank of Nigeria (CBN) raised its benchmark interest rate slightly.
Despite taking measures like blocking access to global cryptocurrency exchanges and targeting illegal currency traders, the naira’s decline has continued. While these efforts have not reversed the naira’s losses, Adedeji’s committee and other observers believe requiring the NNPC to sell crude oil solely in naira might be successful.
However, to ensure the scheme’s success, Adedeji said a coordinating one-stop shop has been established.
“Diesel will be sold in naira by the Dangote refinery to any interested off-taker. PMS will only be sold to NNPC. NNPC will then sell to various marketers for now. All associated regulatory costs (NPA, NIMASA, etc.) will also be paid in naira. We are also setting up a one-stop shop that will coordinate service provision from all regulatory agencies, security agencies, and other stakeholders to ensure a smooth implementation of this initiative,” the FIRS chairman said.
However, while Nigerians remain hopeful that the scheme will reduce fuel prices, reports of a disagreement between Dangote Refinery, which began operations on Sept. 15, and the NNPC have raised concerns about whether the arrangement will benefit the masses. Optimism is further dampened by reports suggesting that the Nigerian Federal government has so far refused to intervene in the dispute.