FG Introduces Naira-Denominated Crude Sales to Local Refineries, Ending 20-Year-Old Scheme

The Federal Government of Nigeria has introduced naira-denominated crude oil sales to local refineries to support local refineries and finally putting an end to the Domestic Crude Allocation (DCA) scheme

The DCA scheme, which has been in place for over two decades, ensured that about 445,000 barrels of crude oil per day were set aside from the federation’s share of oil for domestic refining.

These allocations were intended to guarantee energy security and ensure adequate supplies of refined petroleum products within Nigeria.

However, chronic financial and operational challenges in the country’s refineries often forced a significant portion of the allocated crude to be exchanged through the Direct Sale Direct Purchase (DSDP) program with trading companies.

In an effort to change this narrative, the Federal Executive Council (FEC) approved a proposal by President Bola Tinubu directing the Nigerian National Petroleum Company (NNPC) Limited to sell crude oil to Dangote Petroleum Refinery and other refineries in naira.

Bayo Onanuga, special adviser on information and strategy to the president, announced that the African Export-Import Bank (Afreximbank) and other settlement banks in Nigeria will facilitate these transactions.

“To ensure the stability of the pump price of refined fuel and the dollar-naira exchange rate, the Federal Executive Council today adopted a proposal by President Tinubu to sell crude to Dangote Refinery and other upcoming refineries in naira,” Onanuga stated on his social media account.

He further explained that the 450,000 barrels of crude meant for domestic consumption will now be offered in naira to Nigerian refineries, using the Dangote refinery as a pilot.

This move aims to eliminate the need for international letters of credit, saving the country billions of dollars used in importing refined fuel.

“Dangote Refinery at the moment requires 15 cargoes of crude, costing $13.5 billion yearly. NNPC has committed to supply four. The exchange rate for these transactions will be fixed for the duration, ensuring stability,” Onanuga added.

The new policy is expected to significantly reduce Nigeria’s reliance on imported refined products, boost local refining capacity, and enhance the transparency of the crude oil sales process.

It also aligns with the government’s efforts to mobilize non-oil revenue and improve overall fiscal management.

Femi Soneye, communications chief at NNPC, praised the decision, stating, “Exactly what we have been advocating for is that the crude be shared amongst all local refineries.”

This development comes as Nigeria, one of Africa’s leading producers of crude oil, continues to grapple with underinvestment in the oil sector.

Effective management of the sector is crucial for the country’s economic stability, and this policy shift is a significant step toward achieving that goal.