The Nigerian National Petroleum Company Limited and Dangote Petroleum Refinery are nearing the final stages of negotiations regarding the sale of crude oil to the Dangote refinery and the subsequent buy-back of refined products in naira.
Parties in the deal may conclude discussions next week, the Vice President of Oil and Gas at Dangote Industries Limited, Devakumar Edwin, declared on Thursday during a space session organised by Nairametrics on X.
Edwin also highlighted ongoing challenges with oil marketers, who have been boycotting the refinery’s diesel and aviation fuel due to complaints that the low pricing undermines their businesses. This issue has been escalated to President Bola Tinubu.
Edwin revealed that NNPC had requested oversight of the production process at the Dangote refinery, given their role in supplying the crude oil. This request stems from NNPC’s interest in monitoring the production of refined products to ensure alignment with their contractual terms.
Recall it was reported in August that the Federal Government nnounced that sales of crude oil to the Dangote refinery and other local refineries would begin on October 1, 2024.
This announcement was made by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during a meeting with the Implementation Committee tasked with executing this decision.
“The meeting reviewed progress on key initiatives, including the upcoming commencement of naira payments for crude oil sales to the Dangote Refinery starting October 1, 2024,” the finance ministry had stated in a post on its official X handle in August.
It also stated that the Executive Chairman of the Federal Inland Revenue Service, Dr Zacch Adedeji, and the Chairman of the Technical Sub-Committee reported that “The first PMS delivery from Dangote is expected next month (September) under existing agreements.”
Providing updates on this during the space session on Thursday, the Vice President at Dangote Industries, Edwin, noted that discussions were advancing on naira transactions for crude purchase and product buy-back.
Edwin said, “Now we are still discussing with the government to give us the crude in naira. The discussions have been going on. It has not yet been concluded. When we buy the crude from them in naira, they will take the products back from us in naira, that’s where we are. We are still in discussions.
“So now whatever we are producing, they will buy back from us. In fact, NNPC has told us they will have a team of six to 10 people permanently stationed inside our refinery. They even told us we should give them office space because they are going to give the crude.
“They are going to monitor the production and then they will buy it back in naira. So, this is where we are and we are waiting for the conclusion of the discussions. Hopefully, by next week, if it gets concluded, we can kick off.”
Edwin stated that the President of Dangote Group, Alhaji Aliko Dangote, was the one who insisted on dealing with the Nigerian government in naira because of the foreign exchange challenges confronting the country.
“When it came to petrol, we told the Presidency that if we were going to continue to import crude, our cost of production would be high and of course, our quality is very high. So, we will continue to export and manage the business. Then they sat with us and said, ‘Okay, we will try and give you crude allocation and you please produce and sell to us the products which you are producing out of the crude’. We said, yes.
“Then they said, can you sell it in naira? We said, no, we are a free zone company. We will be normally selling in dollars. They said, no, the country is in acute scarcity of dollars. So, please, we will supply the crude to you in naira. Sell the product to us in naira. Though internally, including me, some of us objected to the idea. My president clearly said we are going to accept this because the country is badly in need of foreign exchange.
“The currency value is dropping every day. Yes, I know I am going to take a loss because by the time we sell it in naira and convert it to dollars, (we are not even getting the dollars). By the time we convert, the currency may become weaker. So, we know he (Dangote) is going to lose. He said, I’m willing to take the loss in the interest of the country. I don’t mind, but the country is in bad shape. Somebody has to take certain risks. I’m willing to face the loss to whatever extent it is. So, that is how we agreed,” Edwin explained.
He also revealed that importers of petroleum products and marketers reported the Dangote refinery to President Tinubu after the refinery crashed the price of diesel.
According to him, over 95 per cent of petroleum product importers in Nigeria are not buying products from the Dangote refinery.
