Crude-for-Naira Deal To Ease Fuel Prices, Availability From October 1- NECA

Crude-for-Naira Deal to Start from October 1

The Crude-for-Naira initiative, set to begin on October 1, 2024, has generated wide reactions across Nigeria, with key industry players expressing optimism.

The agreement struck between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery, is expected to improve fuel availability and ease the pressure on foreign exchange.

According to the Nigerian Employers Consultative Association (NECA), this Crude-for-Naira scheme will address the persistent challenges in Nigeria’s fuel market.

“This new direction would not only benefit the government; it would also have a massive impact on the business community and the Nigerian populace in general,” said Adewale Smatt-Oyerinde, NECA’s director-general, on Monday.

Impact on Fuel Prices

One major expected benefit of the Crude-for-Naira initiative is the reduction of fuel prices at the pump. Oyerinde noted that current pump prices are high because crude oil purchases are denominated in US dollars, which makes fuel more expensive in Nigeria due to currency exchange rates.

“It is expected that the commencement of the Crude-for-Naira scheme from October 1 will cause a reduction in the general price of fuel,” Oyerinde said.

Reduced Foreign Exchange Pressure

The Crude-for-Naira deal is also expected to reduce Nigeria’s reliance on foreign currencies. The current dollar-denominated crude oil purchases have placed a significant strain on the naira.

This new arrangement will shift these transactions to naira, reducing the pressure on Nigeria’s foreign exchange reserves.

Oyerinde added, “This measure would moderate the cost of fuels, reduce the long queues at filling stations across the country, and support the energy needs of small businesses.”

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Government’s One-Stop Shop

The Federal Government plans to establish a one-stop shop to harmonise all stakeholder interests, including regulatory and security agencies, ensuring smooth implementation of the Crude-for-Naira deal.

“The one-stop shop will ensure faster approvals for lifting refined products and will be cost-effective,” Oyerinde explained.

This centralised process is expected to simplify the logistics and distribution of fuel from the Dangote Refinery, improving efficiency in the fuel supply chain.

Call to Expand the Crude-for-Naira to Gas

While NECA welcomes the Crude-for-Naira initiative, Oyerinde urged the government to extend the model to the gas industry.

Currently, the price of gas for domestic industries is pegged to the US dollar, creating challenges for local manufacturers.

Oyerinde argued that adopting a naira-based pricing model for gas could support the struggling manufacturing sector.

“Industries, particularly the manufacturing sector, have suffered significant setbacks due to limited foreign exchange and naira instability,” he said, encouraging the government to take similar steps in the gas sector to aid local industries.

NNPCL Confirms October 1 Start Date

NNPCL spokesperson, Olufemi Soneye, confirmed that the Crude-for-Naira arrangement with Dangote Refinery will begin on October 1.

“NNPC Ltd can confirm that it is paying Dangote Refinery in USD for September 2024 PMS offtake, as naira transactions will only commence on October 1, 2024,” the statement read.

This transition marks a significant shift in the fuel market, aiming to stabilise local fuel prices and reduce Nigeria’s dependence on foreign currencies for crude oil purchases.