FG approves naira payment for crude oil purchase

Indigenous refineries in Nigeria can now heave a sigh of relief as the Federal Government has approved payment for crude oil in naira or dollar.

According to a statement by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), a new template guiding the activities for domestic crude oil supply obligation was developed in compliance with the provisions of Section 109(2) of the Petroleum Industry Act 2021.

The chairman of the Crude Oil Refinery-owners Association of Nigeria (CORAN) Momoh Jimah Oyarekhua, during a meeting with the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri last year, had complained that the modular refineries were starved of crude and even when the crude was available, the local refineries would not afford the payment since it was in US dollars.

While fielding questions from journalists, the Chief Executive, NUPRC, Gbenga Komolafe, said it was necessary to develop the new pricing method as naira transactions for crude oil purchases would free the pressure on the country’s foreign exchange rate.

He added that the template had become effective because stakeholders in the petroleum sector which include the NNPC Upstream Investment Management Services, representatives of Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery had given the go-ahead.

“The PIA intends to make the implementation (of crude oil obligation) very easy for the parties, both for the producers and refineries. So the answer simply is that the currency for the transaction would either be in naira or dollar. That is the simple answer.

“But we all know that if the transaction is carried out in naira, that itself will free the pressure on the exchange rate. That will help the exchange rate. So that is the intent and besides, the overall intent of the Petroleum Industry Act is to develop our midstream, which is a very laudable provision of the PIA.” He added.

The local refiners also spoke on the importance of further developing crude into the local market as it would be a good way to help the country to be self-sufficient in refined products.

This new template will boost local crude oil production and this has been projected to increase the modular refineries from 25 to 40 in the region with a combined target of about 400,000 barrels of crude produced per day.