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The Federal Government, in collaboration with the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery, is set to implement significant changes in Nigeria’s crude oil lifting and petrol distribution processes. Under the current system, NNPCL allocates crude oil for refining and directly distributes petrol through oil marketers and depot owners. However, this system has faced criticism due to the persistent high cost of petrol, largely attributed to the depreciation of the Naira, which currently trades at approximately N1,600/$ on the unofficial market.
In the new arrangement, NNPCL will continue supplying crude oil but will step back from its dominant role in petrol distribution. This move will open the market to oil marketers and depot owners, who can now lift petrol directly from Dangote’s $20 billion refinery. The aim is to remove subsidy payments and allow consumers to bear the full cost of petrol, leading to a more competitive and open market.
The Implementation Committee on Crude Oil Sales in Naira is expected to review the proposal in Abuja this week, with a focus on attracting both local and foreign investments into the oil and gas sector.
Speaking on the development, Adetunji Oyebanji, Managing Director of 11Plc, praised the move but noted that only companies with significant financial strength could fully leverage the opportunity. Similarly, Robert Dickerman, CEO of Pinnacle Oil and Gas Limited, warned that the high price of fuel is tied to the low value of the Naira and may not drop significantly despite the changes.
Meanwhile, Dangote Refinery is set to receive 24 million barrels of crude oil in October and November 2024, as part of an agreement with the Federal Government for local crude supply. This initiative, effective from October 1, 2024, allows NNPC to supply 385,000 barrels of crude oil per day to Dangote Refinery, paid for in Naira. In return, the refinery will provide petrol (PMS) and diesel to the domestic market, also paid for in Naira, with diesel being sold directly to any off-takers, while PMS will initially be sold only to NNPC for distribution.
