In a significant move catering to the demands of domestic crude oil refiners, the Federal Government declared that indigenous refineries can now opt to buy crude oil using either naira or dollars. This announcement, made by the Nigerian Upstream Petroleum Regulatory Commission, comes alongside an increase in Nigeria’s total crude oil and condensate reserves, reaching 37.5 billion barrels as of January 1, 2024.
This development, aimed at fostering a smooth implementation of the Domestic Crude Oil Supply Obligation (DCSO), was achieved through collaborative efforts involving key stakeholders such as NNPC Upstream Investment Management Services, representatives of crude oil and condensate producers, and industry players like Dangote Petroleum Refinery.
According to Gbenga Komolafe, the Chief Executive of NUPRC, the newly developed template for domestic crude oil supply allows transactions to be conducted in either naira or dollar, thereby alleviating pressure on the country’s foreign exchange rate, especially in light of recent challenges faced by modular refineries.
Modular refineries, which play a vital role in the country’s oil sector, have been grappling with foreign exchange constraints, leading to operational uncertainties. With 25 licensed modular refineries in Nigeria, their combined capacity of producing 200,000 barrels of crude oil daily underscores their significance in the industry.
Eche Idoko, the Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria, emphasized the urgency of addressing the currency challenges faced by modular refineries, advocating for the purchase of crude oil in naira to ease pressure on the exchange rate and promote local refinery investment.
In addition to addressing currency concerns, the government also highlighted the significant rise in Nigeria’s crude oil, condensate, and gas reserves, reflecting the country’s potential to sustain production and contribute substantially to Africa’s gas reserves.
As Nigeria explores frontier basins in its quest for new oil sources, debates surrounding exploration expenditure and benefit-sharing continue. However, the potential of these basins to boost Nigeria’s oil production and economic growth remains promising, positioning the country as a key player in the African energy landscape.
