Nigeria’s Oil Crisis: Marketers Condemn FG’s Naira Deal with Dangote Refinery

The Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, has criticized the Federal Government’s decision to sell crude oil in naira to the Dangote Petroleum Refinery. Adewole expressed concerns over the policy, arguing that it could have negative economic implications and create an uneven playing field in the downstream sector.

The decision to sell crude oil in local currency rather than in dollars marks a departure from the usual practice in the oil and gas industry, where crude transactions are typically conducted in foreign currency. Adewole warned that this move could disrupt market dynamics and impact other industry players who still purchase crude in dollars.

He pointed out that most refinery operators and petroleum marketers rely on foreign exchange to import crude and petroleum products. Selling crude to Dangote Refinery in naira, he argued, could give the refinery an unfair advantage, as it reduces the pressure of sourcing dollars in a foreign exchange market that has remained volatile.

Adewole also raised concerns about potential revenue losses for the country. Since crude oil sales are one of Nigeria’s primary sources of foreign exchange earnings, he warned that selling in naira instead of dollars could reduce foreign reserves, which are crucial for stabilizing the naira and the economy.

The Dangote Petroleum Refinery, Africa’s largest privately owned refinery, has been positioned as a major player in Nigeria’s quest for self-sufficiency in petroleum refining. The refinery, which began operations in 2023, was designed to reduce the country’s reliance on imported fuel. However, the Federal Government’s decision to sell crude in naira to the refinery has sparked debate within the industry, with some stakeholders questioning the long-term implications of the policy.

The Nigerian government has defended the move, arguing that it is aimed at boosting local refining capacity and reducing the demand for dollars in the economy. The administration believes that supporting local refineries through measures like naira-based crude sales will ultimately help stabilize fuel prices and create jobs.

Despite these assurances, industry experts remain divided on the potential impact of the policy. Some analysts argue that while it may help Dangote Refinery in the short term, it could create distortions in the market, especially for other refiners who still have to buy crude in dollars. Others have warned that it could discourage foreign investment in the oil sector, as international investors may see it as a shift away from standard industry practices.

Adewole emphasized the need for a fair and transparent policy that does not favor one player over others. He called on the government to consider the broader implications of the decision and ensure that all industry stakeholders operate under the same conditions.

The Federal Government has yet to respond to Adewole’s concerns, but the controversy highlights the ongoing challenges in Nigeria’s oil and gas sector as the country seeks to balance economic stability with industrial growth.