NNPC Sets the Record Straight: Naira-for-Crude Initiative Not Ending Yet

The Nigerian National Petroleum Company Limited (NNPC) has provided clarification regarding its Naira-for-Crude initiative in collaboration with Dangote Refinery, denying assertions that the agreement has been terminated. NNPC stated that the existing contract, which facilitates the sale of crude oil in naira, is scheduled to conclude at the end of March 2025, while negotiations for a new contract are currently in progress.

The Naira-for-Crude initiative was established to enhance domestic refining capabilities, diminish dependence on imported petroleum products, and stabilize the local currency. Since its inception, the program has produced favorable outcomes, with NNPC delivering over 48 million barrels of crude oil to Dangote Refinery since October 2024. The cumulative supply of crude oil to the refinery since it began operations in 2023 has exceeded 84 million barrels.

Renewal discussions

NNPC has commenced new negotiations with Dangote Petroleum Refinery regarding the renewal of the Naira-for-Crude agreement, as the initial contract approaches its expiration on March 31, 2025. Olufemi Soneye, Chief Corporate Communications Officer of NNPC, confirmed that discussions are actively taking place to establish a new contract. “Discussions are currently ongoing towards emplacing a new contract,” he remarked.

The forthcoming contract is intended to sustain support for domestic refining capacity, lessen reliance on imported petroleum products, and stabilize the local currency. NNPC remains dedicated to supplying crude oil for local refining under mutually agreed terms and conditions.

In response to allegations that the government-owned oil company had suspended the Naira-for-Crude agreement until 2030, NNPC clarified that the contract was designed as a six-month arrangement, contingent upon availability, and is set to expire at the end of March 2025.

What are the benefits of this initiative?

The Naira-for-Crude initiative aims to deliver significant advantages to Nigeria’s economy. The following are some of the primary benefits:

·         Market-Driven Pricing: This approach fosters private sector investment and expansion by allowing prices to be determined by market dynamics.

·         Economic Growth: It promotes job creation and invigorates economic activity by enhancing domestic refining capabilities, with the Dangote Refinery projected to generate over 10,000 direct and indirect employment opportunities.

·         Increased Transparency: The initiative reduces unnecessary transaction costs and enhances accountability within the oil sector, as evidenced by the NNPC’s report of a 30% decrease in transaction costs since the program’s launch.

·         Improved Availability: It facilitates greater access to petroleum products across the nation by bolstering local refining efforts, with the NNPC providing over 60 million barrels of crude oil to the Dangote Refinery.

·         Foreign Reserve Boost: The initiative is estimated to save Nigeria approximately $12 billion each year by minimizing the reliance on dollar transactions, according to NNPC estimates.

·         Job Creation: It is anticipated to generate up to 15,000 direct jobs in sectors such as transportation, refining operations, and supply chain management, with the Dangote Refinery expected to create over 7,000 direct positions.

·         Reduced Dependence on Imports: The initiative significantly decreases Nigeria’s foreign exchange expenditure on petrol imports by 95%, lowering it from $8.5 billion annually to just $425 million per year, based on data from the Central Bank of Nigeria.

·         Stabilization of Local Currency: It alleviates pressure on foreign exchange reserves, thereby supporting the stability of the naira, with the CBN reporting a 25% reduction in foreign exchange demand since the initiative’s implementation.

The Naira-for-Crude initiative holds the potential to revolutionize Nigeria’s economy by encouraging domestic refining, decreasing reliance on imports, and stabilizing the local currency. As the nation continues to navigate the intricacies of the global oil market, this initiative presents a promising perspective for Nigeria’s economic advancement and development.