3 Days Later: Why Has the Naira-for-Crude Deal Been Delayed?

The much-anticipated naira for crude deal between the Nigerian National Petroleum Company Limited (NNPC) and Dangote Petroleum Refinery, set to commence on October 1, 2024, has yet to begin as of October 3, 2024. 

This deal hailed as a groundbreaking initiative that would allow NNPC to supply crude oil in exchange for naira, is now facing delays with no official updates from the key parties involved.

In the days leading up to October 1, a Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency had confirmed that NNPC would start supplying 385,000 barrels of crude oil per day (bpd) to Dangote’s $20 billion Lekki-based refinery. 

This was part of a larger strategy approved by the Federal Executive Council (FEC) in September to ease pressure on the naira and reduce operational costs in Nigeria’s oil sector. The arrangement promised to exchange crude for refined petroleum products such as petrol and diesel, all in naira, benefiting the local economy.

However, despite the official announcements, as of October 3, there is still no confirmation that the supply has started. 

When contacted, officials from NNPC, Dangote Refinery, the Federal Ministry of Finance, and other relevant agencies remained tight-lipped, offering no clarity on why the deal had been delayed.

Silence and Uncertainty: Where Is the Hold-Up?

The delay in the deal’s commencement is raising concerns. An official from the domestic refinery sector, who spoke under the condition of anonymity, indicated that crude oil refiners, including Dangote, are still awaiting communication from the government. “We haven’t received any confirmation yet. 

The government assured us that they’re working on it, but no official communication has been made,” the source said.

It appears that the Federal Government’s Technical Committee, chaired by Federal Inland Revenue Service (FIRS) Chairman Zacch Adedeji, is working behind the scenes to iron out the final details. Adedeji’s team has reportedly been working “day and night” to ensure that all technicalities are addressed. Yet, as of now, no crude oil has been delivered to the refinery, and the reasons behind the delay remain unclear.

An official from another refinery suggested that delays of this nature are not uncommon in large-scale deals involving complex logistics and regulatory frameworks. “These deals take time. 

There are a lot of moving parts that need to be aligned before the final decision can be implemented,” he explained. While such delays can be frustrating, the official emphasized the need for patience.

What is at stake?

The naira-for-crude initiative was conceived as a solution to several pressing issues in Nigeria’s economy. By trading crude oil in naira, the deal aims to reduce the strain on the country’s foreign reserves, cut out unnecessary transaction costs, and increase the availability of petroleum products in the domestic market. 

In addition to providing refined petrol and diesel to the local market, Dangote’s refinery would sell diesel directly to interested buyers, while NNPC would handle the sale of petrol through existing marketers.

The committee in charge of the deal assured Nigerians in September that the plan was in “top gear.” They highlighted the potential economic benefits of keeping oil-related transactions in local currency, which would help stabilize the naira. 

However, the delay in implementation has now introduced an element of uncertainty. If the deal continues to face setbacks, the anticipated relief for the economy could be delayed, which would only heighten the pressure on the naira.

Waiting for clarity?

While the reasons for the delay have yet to be fully explained, experts suggest that the complexities involved in operationalizing such a deal may be the root cause. Regulatory approvals, legal frameworks, and logistics all play a role in getting large-scale initiatives like this off the ground. 

Additionally, the Technical Sub-Committee is working to establish a one-stop shop to streamline services from regulatory agencies, ensuring the deal runs smoothly once it officially begins.

Until these details are fully addressed, NNPC, Dangote Refinery, and other stakeholders remain silent, leaving many in the energy sector—and the general public—waiting for answers.

For now, the question remains, Why is the naira-for-crude deal delayed, and how soon will the Federal Government and its partners resolve the outstanding issues? The answer could have significant implications for Nigeria’s economic future and the stability of the naira. All eyes are now on the government and the technical committee, hoping for a swift resolution to the delay.