The Independent Petroleum Producers Group (IPPG) has rejected a directive by President Bola Tinubu on mandatory sale of crude oil to Dangote Oil Refinery and Petrochemicals and other local refineries in naira.
The IIPG made this known via a letter dated August 16, 2024 and addressed to the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe.
Tinubu had in July ordered NNPCL to sell crude oil to Dangote refinery and other local refineries in naira.
The Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, who disclosed this while briefing State House correspondents at the end of the Federal Executive Council on July 29, said FEC approved that sale of petroleum products to approved local petroleum marketing companies be conducted in naira at the same fixed exchange rate.
The IIPG, in a letter signed by its chairman, Abdulrazak Isa, also called on the Nigerian National Petroleum Company Limited (NNPCL) to re-direct its allocated crude oil volumes to Dangote refinery and other local refineries to mitigate the current crude supply shortage being experienced by the local refiners which is impacting local product availability in some parts of the country.
The oil producers stated that the NNPCL should utilise its allocated 445,000 barrels per day intervention crude oil volume to salvage the current situation as it did in many instances in the past.
The group said some of its members insisted that the NNPCL was in a good position to mitigate the current crude supply shortfall faced by local refiners by leveraging its statutory crude allocation to meet local domestic consumption.
The IIPG noted: “Historically, NNPC has always had an intervention crude oil volume (445kbopd) meant to satisfy the nation’s domestic consumption. This volume has always been used, under various swap mechanisms, to import refined products for domestic consumption.
FG begins crude oil sales in naira to Dangote refinery, others October
“Since there is now domestic refining capacity to meet consumption, this dedicated volume should be reserved for all domestic refineries under a price hedge mechanism that can be provided by a suitable financial institution such as Afrexim Bank.
“Any national production above this allocated volume should be treated strictly as export volumes, adhering to the willing-buyer, willing-seller framework of the international market especially since the refiners will need to export excess products that surpass domestic demand thus boosting FX earnings.”
The group further disclosed that some of its members had received letters from the Dangote refinery for crude supply nominations for October, and faulted the approach as bringing them under an obligation.
It said the development conflicted with the spirit of the willing-buyer and willing-seller framework prescribed by the Petroleum Industry Act (PIA) 2021.
The oil producers added that the objective of enhancing the country’s petroleum value chain should be done within the confines of the law and existing obligations.
The IPPG, however, expressed confidence that an amicable solution could be reached by all stakeholders without jeopardising the existing commercial agreements, economic interests, and business models of each segment of the oil and gas sector.
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