Opinion
By Abiodun Komolafe
ASSUMING no unforeseen circumstances, Dangote Refinery is expected to make its first
delivery of refined premium motor spirit, pms, to the Nigerian market by September 2024.
The Federal Government has also announced that sales of crude oil to Dangote and other
local refineries will begin on October 1, 2024. To address concerns about pump prices and
dollar-naira exchange rates, the Federal Executive Council approved a plan. The plan offers
450,000 barrels for domestic consumption in naira to Nigerian refineries, with Dangote
Refinery as the pilot.
To begin with, this directive to the Nigerian National Petroleum Company Limited (NNPCL)
marks a pivotal moment in Nigeria’s efforts to redefine crude oil sales and bolster the local
economy through domestic transactions. The move is expected to have a positive impact on
various sectors, including manufacturing and agriculture. Selling crude oil in naira will
reduce reliance on foreign exchange, thereby stabilizing the currency. For instance, if Nigeria
sells 450,000 barrels of crude oil per day to local refineries in naira, it could reduce the
country’s foreign exchange expenditure by approximately $1.5 billion annually, assuming a
crude oil price of $60 per barrel. This could be a significant step towards economic
diversification and growth, if implemented effectively.
The success of this initiative depends on effective implementation; and the Zacch Adedeji-led
Technical Sub-committee has a crucial role to play in this critical, perhaps, even national
groundbreaking endeavour which could propel the country into meeting the needs of the
present without compromising the ability of the future. Adedeji’s expertise and reputation for
delivering results make him an excellent choice. With a strong background in public service,
including his tenure as Oyo State Commissioner for Finance, Executive Secretary of the
National Sugar Development Council (NSDC), and Executive Chairman of the Federal
Inland Revenue Service (FIRS), he possesses the necessary skills to drive transparency and
achieve the programme’s objectives.
In the public service environment, bureaucracy dictates that success is shared, not
individually claimed. For instance, FIRS operates under the Ministry of Finance, which will
likely credit President Bola Tinubu for the programme’s achievements. Ultimately, the
president, who also serves as Minister of Petroleum, bears the responsibility. Therefore, this
Sub-committee’s work will significantly impact how history judges Tinubu’s government,
making it a legacy project.
On paper, the tasks seem straightforward, but two critical issues must be resolved first,
otherwise, there will be fundamental defects. Firstly, the Sub-committee must ascertain the
accurate crude oil production levels, factoring in theft and forecasting production for the next
two years. Secondly, it must confirm the number of forward sales agreements. This is critical
as Nigerians are not even sure that forward sales are still not being made. Only after
addressing these issues can a realistic figure be set to support local refineries.
If the Federal Government had not issued this directive, Nigeria’s dependence on oil exports
and foreign currency would continue to stifle economic growth and diversification. Local
refineries would struggle to access affordable crude oil, and the status quo would persist. This
would mean missing out on opportunities for economic diversification, growth and development. To ensure cost-effectiveness therefore, the Sub-committee must assess whether
the allocated amount will achieve necessary economies of scale, and also consider the
opportunity cost of selling in naira, which means forgoing anticipated foreign exchange
earnings. Nevertheless, the ultimate goal is to utilize full production capacity domestically
and export refined products, in sync with the national interest.
Nigeria currently faces a balance of payment crisis and a dysfunctional economy. The
country is not attracting worthwhile investments, apart from ‘hot’ portfolio investors. What
we need are patient investors who will eventually translate into socially responsible growth.
Therefore, the Sub-committee’s work is crucial in addressing structural debilitation stunting
sustainable development. Establishing sustainable refining capacity at home can help address
the balance of payment crisis and current account deficit. As a result, this will yield immense
foreign exchange savings, benefiting sectors like Aviation, manufacturing, and agriculture.
Added to these is that local refining capacity will support the transition to commercial,
science-led farming, modernizing agriculture.
The Sub-committee must accurately determine crude oil production levels and verify forward
sales contracts. This ensures FIRS receives the correct revenue allocation for the Federation
Account. As the sole collection agent for the Federal Government, the Service relies on
precise data to manage and distribute resources effectively. In a world that seems to have
forgotten its meaning, this underscores the significance of its role in maintaining the country’s
economic stability, making it essential to ensure the Sub-committee’s assignment is
completed with utmost accuracy and transparency.
The pending sale of national assets in the oil sector is prompted by the departure of major
players like AGIP and TOTAL from Down- and Upstream sectors. This development
presents a critical concern that requires urgent attention. Indeed, this issue has already
sparked intense discussion, as evident in the recent exchange between Oando/OVH/NNPCL
and former Vice President Atiku Abubakar.
To fully leverage the naira crude revolution’s potential, NNPCL must address its internal
challenges, which hinder its ability to compete with international peers like Aramco,
Petrobras and PETRONAS. Unlike these industry leaders, NNPCL faces substantial
challenges, including corruption, mismanagement, and security issues, which limit its ability
to optimize production, invest in research and development, and diversify its portfolio. For
instance, while Petrobras excels in deep-water exploration, NNPCL’s security concerns
restrict its ability to explore and extract oil in certain regions. Similarly, while PETRONAS
boasts a diversified portfolio, NNPCL’s mismanagement and corruption issues hinder its
capacity to invest in new ventures.
Overall, while NNPCL has opportunities for growth, it trails behind peers in terms of
technological advancement, financial performance and operational efficiency. As the global
energy landscape shifts, Nigeria must adapt or risk being left behind. By adopting best
practices and addressing its internal challenges, NNPCL can unlock its full potential and
support Nigeria’s economic development. The conventional wisdom, headed by Adedeji, has
the technical capacity to get to the bottom of the dysfunction and in the process make path-
breaking contributions to national development.
With the September rollout looming, Nigeria’s economic fate is uncertain. Take it or leave it,
the Sub-committee can be given a success possibility only if the Tinubu-led administration is prepared to sincerely confront the powerful cabals whose desperation is no more a hidden
secret. In a land that’s full of possibilities and questions, it’s like trying to please a room full
of hungry lions with a single piece of meat. Indeed, this makes Adedeji and his fellow risk-
takers’ job appear even more perilous than leading a conventional war.
The naira crude revolution has the potential to positively impact Nigeria’s economy by
reducing reliance on foreign exchange, but its success depends, primarily, on addressing
existing challenges. And as Nigeria embarks on this bold initiative, will it be the catalyst for a
brighter economic future, or will it succumb to the same pitfalls that have hindered progress
in the past? Again, what if the proposed hymn of humanity refuses to be a paean to our
collective compassion but a dirge for our societal failures?
At a time like this, one can only wish Zacch Adedeji and his team every success in this
complex endeavour!
May the Lamb of God, who takes away the sin of the world, grant us peace in Nigeria!
*KOMOLAFE writes in from Ijebu-Jesa, Osun State, Nigeria (ijebujesa@yahoo.co.uk)
31st August, 2024.
C.E.
Tags: Dangote refinery
