Nigerian government plans to save $7.32 billion annually following President Bola Tinubu’s directive that the Nigerian National Petroleum Company Limited (NNPC) sell crude oil to local refineries in Naira, as announced by Zacch Adedeji, Special Adviser on Revenue.
News360 Info reports that on Monday, President Tinubu instructed the NNPC to initiate immediate engagements with local refineries, including the Dangote Refinery, to conduct transactions in Naira.
This announcement came after the Federal Executive Council (FEC) meeting chaired by President Tinubu, according to Zacch Adedeji, who briefed journalists at the State House.
This move aims to reduce Nigeria’s dependency on foreign exchange for crude oil imports, which currently account for about 30 to 40 percent of the country’s forex expenditure. The initiative is also expected to include selling Dangote’s refined products in Naira.
Adedeji, who also chairs the Federal Inland Revenue Service (FIRS), stated that conducting these transactions in Naira is projected to alleviate the government’s forex burden and generate significant annual savings of approximately $7.3 billion.
He highlighted that this policy would help stabilize domestic crude oil prices by lessening the effects of forex fluctuations.
This new strategy is designed to reduce the pressure on Nigeria’s foreign exchange reserves by cutting monthly forex spending on petroleum products from $660 million to $50 million. AFREXIM Bank has been appointed as the pilot settlement bank for facilitating these transactions.
“Today, at the Federal Executive Council, a memo from Mr. President emphasized promoting crude oil sales to local refineries and transactions with the NNPC in our local currency,” Adedeji explained.
He commended President Tinubu’s innovative approach to addressing Nigeria’s economic challenges with locally driven solutions.
Adedeji noted that Nigeria currently spends about 30-40% of its forex on PMS imports, totaling roughly $660 million monthly or $7.92 billion annually. The new policy is anticipated to slash these costs by 90%, lowering the monthly expenditure to $50 million, saving the nation about $7.32 billion annually.
He also mentioned that finance costs associated with opening letters of credit, currently amounting to $79 million, will decrease. AFREXIM Bank will serve as the lead arranger between the NNPC and the Dangote Refinery, coordinating this initiative.
He praised the efforts of AFREXIM Bank’s President, Prof. Benedict Oramah, for facilitating this significant initiative, alongside collaboration with the Central Bank of Nigeria, the NNPC, and the Federal Ministry of Finance.
The Presidential Adviser, said, “with this approval today through FEC, led by Mr. President, this has reduced by minimum of 90% because what we have today, will mean transaction is now done in our local currency, not only with Dangote Refinery, but to all local refineries for all our local consumptions and this will actually stabilise the pump price.
This will also make economic predictability a reality because we will no longer rely on the fluctuations that happen in FOREX. This is an innovation to solving our problems as a country today.
Just to be specific, I’ll just read parts of the benefits. Number one, which is major, is the reduction in foreign exchange pressure, as the existing process that we have today utilises $660 million per month, totally $7.92 billion annually.
With the new approval that we have, this will reduce to maximum of $50 million per month which is annnualised to be only $600 million. This is total reduction of 94% and saving us $7.32 billion.
This will also reduce finance costs, which today stands at $79 million, when you consider opening letter of credit between those local refineries and what happens.
Also, as a pilot, Council has approved that a settlement bank, which in this instance is AFREXIM Bank, whould be the lead arranger between NNPC and Dangote Refinery.
So, this is a major innovation in solving Nigeria’s problem permanently. Not only will we have more employment, but we will definitely be in charge of one of the mainstay of our economy.
So I congratulate the Council members, Mr. President, and also congratulate the operators; the NNPC and Dangote Refinery and also the lead arranger AFREXIM Bank because kudos should go to the President of the African Export-Import Bank (AFREXIM Bank), Prof. Benedict Oramah, for this initiative because these are people that work behind the scenes to make sure that what we witnessed today happened.
One of the major directives of Mr. President and the Council in general, is that AFREXIM leads the advisory work of structuring and arranging this initiative with the Associated Trade Finance Facility, in collaboration with the Central Bank of Nigeria, the Nigerian National Petroleum Corporation Limited and Federal Ministry of Finance and other critical agencies”, he said.
