Nairalization Of Crude Oil Sale To Local Refineries: The Much Expected Game Changer 

By: Shehu Bashir Esq

The global political economy around the crude oil dealings has not favourd Nigeria as a nation and the citizens have not benefited much from such either. Whereas, every nation is expected to conduct its domestic businesses in its local currency. At least, that should be a rational economic policy to help the nation grow. It becomes an aberration when foreign currency takes the centre stage as the medium of exchange in the local market. It does not always look good for any country who dumps her currency for a foreign note.

This unfortunate but dominating currency superiority placement whereby preference and priority are given to dollar, especially, ahead of Naira even in domestic tradings has been one of the major bane of development against the Nigeria nation. The means of exchange in financial transaction has rather underdeveloped the nation than it has developed it. Walter Rodney captured something similar in his book on “How Europe Underdeveloped Africa”. No doubt, unlike many other developing countries, Nigeria has become subservient to foreign currency dominance. It is both economical and social mentality siege.

Let’s even leave the past and discuss the present. The raging but now “receding” squabble that has dominated our socio-economic space in the last few weeks between the country’s owned oil company, NNPCL and the country biggest privately owned refinery, Dangote Refinery, has exposed a lot in the mentality of economic managers and players in the oil sector. The mentality of greed, corruption and corrosion. There is no doubt that the squabble has exposed the corrupt ability of the system where patriotism takes the back seat.

While this quagmire was going on, many people expressed certain sentiments which were in themselves illogical. There have been such arguments that the OIC cannot sell crude oil to local refineries because of one international agreement or another. The argument that Nigeria has a forward sale agreement to foreign lenders and as such cannot supply Dangote the needed crude for local consumption.

Many apologists even suggested albeit erroneously that OPEC cannot allow the federal government to supply crude sale to a local refinery because we would have exceeded our quota, bla bla bla. I wonder when OPEC started to regulate local consumption of petroleum products. OPEC is largely focused on export quota to maintain supply equilibrium in the international market.

The truth is, none of these assertions is true. Everyone who had spoken in this direction had done so to either seek for social relevant or appear politically correct to justify the lapses and error from the so called sector regulator – the NNPCL. Strangely, none of these proponents of “crude oil cannot be sold to Dangote” has come out to query the double role stance of NNPCL – being the regulator and player at the same time. If NNPCL must be a player like Saudi Aramco and Malaysia Petronas, it cannot stand as regulator at the same time. What happens to the transformation from corporation to limited liability company?

The role played by NNPCL abi initio, from the publicly announced stake in Dangote which was found to be less than what we were told, to the demarketing conspiracy by certain bloc, to the failure to responsibly run the state owned refineries (Kaduna, Warri and Port Harcourt), it is obvious that it was a compromise from the beginning to frustrate a national asset in order to promote a foreign front – petroleum importation.

The first clear fact is that the crude oil is owned by Nigeria and Nigerians have the “first line charge” right to our natural resources first, for our welfaristic benefit even before economic consideration.

Dangote refinery is largely owned by a Nigerian and the refinery is domiciled in Nigeria. Under the local content rule, Dangote Refinery, like all other domestic refineries should have the “right of first refusal” on what they will produce locally and sell to local market. The fact also is that more that 80% of what Dangote Refinery may refine in petroleum product, be it AGO, DPK or PMS will be consumed locally. Why then should any rational department of government attempt to frustrate an effort that will bring succour and relief to Nigerians?

In the first place, nothing should have even made anyone propose or insist on the sale of crude oil to Dangote using foreign currency. It is illegal and unethical to do so ab initio. The economy in general has taken a steep dive into the bottom because priority has been given to foreign currency usage on our daily business dealings. It took the EFCC to warn businesses from using foreign currency to conduct domestic business. It is only in Nigeria that this is prevalent and no one is punished for it.

As soon as the federal government announced the removal of the subsidy, the first expected next line of focus to cushion the effect of that removal was to incentivize the already established local refineries to start quick production and flood the market with petroleum products. This will automatically discourage importation of petroleum products. We have all agreed that importation of petroleum products has damaged our economy than it has mended it. If paying subsidy is not helpful to the economy, importation of the petroleum products cannot be an alternative.

Incentivizing these refineries would mean making available crude oil to them, selling of crude oil in Naira, giving them tax holiday for a period of five years under pioneer rule in tax administration, etc. This will not only ensure adequate supply of refined petroleum products in the market, it will automatically crash the price and make things easier for Nigerians. There will be more demand for Naira than dollar, thereby crashing the dollar in our local market. In the process, many players will enter the market and more jobs will be created. Who is not thinking towards this direction to help Nigerians?

Where there is any such existing agreements (which is doubtful) with an obligation to supply only international buyers with our crude, that should not in anyway affect the supply of crude to local refineries for local market. Even if such agreement exists, all it requires is for more local companies to be given oil well with specific mandate for them to produce crude oil and sell only to local refineries. Again, what is difficult in this?

Ideally, these are supposed relief policies that would help the government serve the people better while creating the best for the people. However, corruption has eaten deep into our flesh that we see everything from the personal and selfish financial benefit. This is the drive that would make a government appointee develop such unpatriotic gut to describe the products from a domestic refinery as inferior. This is not minding the fact that the refinery is the single largest train refinery in the world.

The historical decision by the FEC as chaired by the President to domesticate the crude oil transaction to be done in Naira and Kobo is indeed a game changer. It will not only help in reviving the economy, it will also bring back sanity into the system. This will also encourage many local investors in the sector to invest more in refinery business. The natural resources of any country is first for the benefit of the citizens of that country. Only after then should the nation decide to export same to make money and help other countries.

Additionally, there has been too much pressure on Naira with unabated quest for foreign currency to do even local transactions. Official statistics have it that over seven billion US dollars is needed to subsidize the importation of petroleum products. That is about 32% of the country foreign exchange. That is huge and unsustainable. Therefore, the use of Naira in crude oil sale to local refineries will also, no doubt, help in reducing this pressure and will definitely increase the value of Naira, even internationally.

Whatever that may be left of the refined products after the allocated quota has been supplied to the local market can then be exported by Dangote as may be mutually agreed with the federal government. This is the best stimuli to catalyze the economy to greatness. There is no other way to encourage even foreign investors than a stable and consistent policy system. Working against domestic investment will discourage FDI and FPI. This is the way to grow a nation, fight inflation and increase the quality of life of the people.

Mr. President could not have made a better decision at this critical time. The decision to nairalize the crude sale to Dangote Refinery and other private refineries is indeed a game changer. This will demystify the cabal and the cartel, removing their grips off our economy. The proponents of oil importation and the suckers of our forex will now rest, atleast, for now. It is disheartening to hear people describe our economy as being “in bad shape” when we have all that it takes to have the best economy in the world.

This is the more reason why we should lace our shoes and knot our tie with the patriotism to save this nation from the brink of collapse. We cannot continue to feed capitalism and destroy socialism or welfarism. Libya was more or less a welfarist nation under Ghaddafi and there was no shortage of infrastructure or material development in his life time until the snail shell was punctured from the back.

What is left now is presidential monitoring. People break even the law let alone policies. Some corrupt elements within the sector who have been benefiting from oil importation will not want this policy to succeed. They may still want to frustrate this all important decision using one tactics or another. The cabals are never going to let go off this unholy control of the economy unless it is “forcefully” taken away from them. They will sponsor some elements to frustrate the efforts. The syndicate is wide and their tentacles are everywhere. At every state of the implementation, attempt will be made to frustrate this.

Therefore, for this to be more effective, Mr. President should take further steps by proposing amendments to the existing law, especially, Petroleum Industry Act, to the effect that all dealings involving crude oil sale to local refineries be conducted strictly in Naira. It will be appropriate if an executive order is made in the interim while the process for amendment is ongoing.

It is worthy of note to appreciate the choice of a clearing house, the settlement bank, in this case the AFRIEXIM BANK. This will ensure healthy financial transactions through the monitoring of ethical compliance in the financial dealings between the NNPCL and Dangote Refinery. It is the expectation of Nigerians that this will bring, in practical terms, the much expected relief and comfort to Nigerians. In the long run, this policy if sustained, will douse any tension occassioned by economic hardship. It will also help in taming the barking dogs and political agitators who are out there hawking for opportunities to fuel crises, chaos and anarchy in the country. If anything, federal government should always tailor its policies toward a direction that will bring comfort to the people and generate zero tension from the populace. Adopting Naira as the sole medium of exchange between NNPCL, its subsidiaries and Dangote Refinery and other private refineries is a game changer and a practical renewed hope effort to relieve the citizens yearning for relief. The time to invest in Nigeria, grow Nigeria, develop Nigeria and sustain the development is now. Let the country breathe.

GOD IS HERE