Nigeria's Local Currency Crude Oil Plan Hits Roadblocks

November 23, 2024 by admin

Julianne Geiger

Julianne Geiger is a veteran editor, author and scientist for Oilprice.com, and a member of the Creative Professionals Networking Group.

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By Julianne Geiger – Nov 22, 2024, 2:30 PM CST

Nigeria’s enthusiastic technique to cost petroleum in naira for regional refineries has actually come across substantial problems simply 2 months after its rollout. Led by the Nigerian National Petroleum Company (NNPC), the strategy’s objective was to support the nation’s dollar reserves while guaranteeing adequate unrefined supply for domestic refining.

The effort appears to be failing. Significant gamers like Dangote Oil Refinery are getting just a portion of what it was assured.

According to Edwin Devakumar, the Dangote refinery’s executive director, NNPC dedicated to providing 385,000 barrels daily (bpd) to the 650,000-bpd center however has actually stopped working to fulfill even this minimized quota. Explaining shipments as “peanuts,” Devakumar highlighted the obstacles of counting on irregular domestic supply chains. Other refineries under the Crude Oil Refinery-owners Association of Nigeria (CORAN) report being totally omitted from the naira-based unrefined program, pointing out continuous settlements with the federal government for resolution.

This supply crunch has actually required Dangote to turn to worldwide markets, just recently acquiring 2 million barrels of U.S. WTI Midland crude. This might highlight the refinery’s international competitiveness, however it likewise exposes the insufficiency of Nigeria’s domestic crude allotment system.

NNPC has actually dealt with criticism for its failure to deal with a long history of persistent oil theft and pipeline vandalism. It now deals with brand-new criticism– for stopping working to focus on regional refining requirements. Efforts to impose domestic supply guidelines through the Nigerian Upstream Petroleum Regulatory Commission have actually up until now shown inadequate.

As Nigeria’s biggest refinery edges towards its year-end objective of 85% functional capability, its battles are emblematic of wider systemic problems in the nation’s energy sector. Without dependable unrefined supply, the vision of a self-dependent refining market– anchored by the Dangote refinery– threats being another latent aspiration in Nigeria’s intricate oil landscape.

By Julianne Geiger for Oilprice.com