Nigeria to begin naira crude sale in October

Nigeria is gearing up to commence naira crude oil sales to Dangote Refinery and other local refineries from the first of October this year in a move aimed at reducing the impact of foreign exchange pressure on the naira. The Nigerian National Petroleum Company Limited (NNPC) is set to implement this pilot project which marks the first of its kind. Oyeyemi Oke, a Partner at AO2 Law, shed light on the objectives of this plan during an interview with CNBC Africa. Oke highlighted that the primary goal of this initiative is to alleviate the reliance on foreign exchange to purchase commodities. By conducting transactions in naira, the need for foreign exchange will be diminished, potentially providing some stability to the local currency. However, despite the optimistic outlook, there are lingering questions regarding price stability and predictability in this new system. Oke pointed out that while the move may mitigate some pressure on the naira, certain refinery operations and expenses will still be tied to the dollar, potentially causing fluctuations in prices. Nevertheless, the shift towards naira transactions is expected to mitigate the drastic spikes witnessed in recent months. The upcoming sale to Dangote Refinery raises questions about allocation to other local refineries and the overall structure of the sales process. Oke emphasized the need for clarity on issues such as pricing, allocation volumes, and post-sale arrangements to ensure a smooth transition to this new system. Additionally, the imminent revival of the Port Harcourt refinery and the involvement of other local refineries further complicate the sharing formula and allocation process. With uncertainties surrounding the distribution of crude oil and the post-sale dynamics, stakeholders are advised to tread cautiously and closely monitor the implementation of this plan. The interview also touched on the persistent petrol scarcity in Nigeria, with conflicting narratives from market players and regulatory bodies. The absence of clarity on supply timelines and the blame game between NNPC and marketers underscore the ongoing energy security challenges in the country. Oke highlighted the need for transparent communication and coordinated efforts among regulators and industry players to address the existing supply chain disruptions and ensure a stable fuel supply in the market. The role of regulators in monitoring compliance and curbing malpractices, such as diversion of petrol for black market sales, was emphasized as a crucial factor in restoring stability in the petrol distribution network. Despite the regulatory interventions, the core issue of limited product availability remains a pressing concern that requires immediate attention and resolution. As Nigeria grapples with the complexities of transitioning to naira crude sales and tackling fuel scarcity, collaborative efforts and effective strategies are essential to navigate these challenges and safeguard the nation's energy security. While uncertainties persist, proactive measures and transparent governance will be key in driving sustainable solutions and enhancing stability in the Nigerian energy sector.