The Nigerian government’s plan to sell crude priced in the local currency is faltering, with refiners, including the giant Dangote Oil Refinery, saying they are still unable to secure adequate supplies, reports Reuters.
The implication is that the initial six-month arrangement for the local refineries, may have begun on a faulty note devoid of trust and confidence, even as the nation’s oil company, NNPCL has begun scouting for buyers for its new Utapate crude oil grade and Dangote looking beyond the shores for supplies.
This is amid persistent shortage of foreign currency with the attendant volatility in the market.
Government’s forex restrictions, policy-induced distortions in the currency market, and heightened inflation rates which have created substantial risk for foreign businesses.
Specifically, to address challenges in accessing foreign currency, the government in July said it would sell crude priced in naira to local refineries for an initial six months starting in October.
“We need 650,000 barrels per day, (state oil firm NNPC Ltd) agreed to give a minimum of 385,000 bpd but they are not even delivering that,” said Edwin Devakumar, head of the Dangote refinery.
The refinery built by Nigerian billionaire Aliko Dangote in Lagos aims to compete with European refiners when operating at full capacity but it has struggled to secure sufficient crude supplies to run optimally.
While Devakumar declined to give specific figures, he described deliveries from NNPC under the scheme as “peanuts”.
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Still, Dangote is the only one of 8 operational refineries in Nigeria to have benefited from the naira-denominated crude sale arrangement, said Mathins Obaze, an acting executive director of the Crude Oil Refinery-owners Association of Nigeria (CORAN), a trade group of refiners.
“Members are still unable to access crude in naira and are currently engaging the government for a resolution,” Obaze said.
The reason for the shortfall was not immediately clear. NNPC did not respond to a request for comment.
The Dangote refinery in August urged the oil regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to enforce a rule that compels oil producers to supply local refineries.
NUPRC did not respond to a request for comment on the matter.
Dangote, with a current capacity of 425,000 bpd and a year-end target of 85% operational capacity, has turned to international markets for supplies.
It purchased two million barrels of U.S. WTI Midland crude on Wednesday, its first U.S. crude purchase since August, according to trade sources and shipping data.
Meanwhile NNPC is pursuing new markets for its crude oil. The company was in London on Wednesday seeking term customers for its new Utapate crude oil grade.
