Nigeria will start selling crude oil in its naira currency to the Dangote refinery from October 1, the finance ministry said in a statement, in a move aimed at easing foreign exchange pressure on the country's main oil refinery.
The $20 billion Dangote facility, billed to be the largest in Africa at full throttle, has struggled to secure enough crude to meet its 650,000-barrel-per-day capacity since production started in January.
Dangote previously had to buy oil on the international market and it has accused Nigeria's oil regulator of failing to enforce a law that requires producers to supply domestic refineries.
Last month, the government gave state oil firm NNPC approval to start selling crude to the refinery in the local currency.
Dollar shortages
Nigeria has suffered chronic dollar shortages that have forced authorities to devalue the naira twice in less than a year, as part of the new government's measures to stabilise the currency and attract investment.
Despite supply constraints, Nigerian refineries including Dangote have raised their domestic crude requirements to 597,700 barrels per day (bpd) in the second half of 2024, up from 483,000 bpd in the first half, according to the regulator.
Nigerian producers under the Independent Petroleum Producers Group (IPPG) have voiced concerns about the proposed measure requiring the sale of oil to local refineries in naira.
"They will see a reduction in forex earnings and since most of their expenses are priced in dollars, it could even impact their income. But this would not be substantial, if the transactions are done on market terms," Ayodele Oni, an energy lawyer at Lagos-based lawfirm Bloomfied, said.
A dedicated 445,000 bpd held by the NNPC should be reserved for all domestic refineries under a price hedge mechanism, IPPG Chairperson Abdulrazak Isa said, adding that any national output above this volume should be treated strictly as export.
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