The Nigerian government announced a major shift in its oil policy on Monday, mandating the state-owned oil company, NNPC Ltd, to sell crude oil to domestic refineries, including the mega Dangote refinery, in naira.
The move aims to alleviate mounting pressure on the country’s foreign exchange reserves.
The $20 billion Dangote refinery, Africa’s largest when operating at full capacity, has faced challenges securing adequate crude supplies since commencing operations in January.
Despite its massive scale, the refinery has been reliant on costly imports due to alleged obstructions from oil majors.
To address these issues and bolster the naira, the government has authorized NNPC to sell crude to both Dangote and other local refineries exclusively in the domestic currency.
This decision is expected to significantly reduce the demand for dollars, according to Zacch Adedeji, chairman of Nigeria’s Federal Inland Revenue Service.
Adedeji emphasized the potential economic benefits, stating that the new policy could save the country up to $7.32 billion annually.
Nigeria has grappled with severe dollar shortages, prompting multiple naira devaluations in the past year.
Analysts believe that the naira-denominated crude sales could mitigate the need for refineries to secure foreign loans and decrease transportation costs.
However, some experts caution that the policy shift might impact Nigeria’s overall foreign currency earnings.