Dangote Petroleum Refinery yesterday announced a temporary stoppage of the sale of its petroleum products in naira, raising concerns over possible disruptions of the pricing and stability of the petroleum market.
The management of Dangote Refinery, in a statement, stated that the decision to temporarily halt the sale of petroleum products in naira was to avoid a financial mismatch, between sales proceeds in naira and crude oil purchase obligations, which are currently denominated in dollars.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” Dangote stated.
According to the company, the sale of products in naira would resume as soon as it receives an allocation of naira-denominated crude cargoes from Nigeria National Petroleum Company Limited (NNPCL).
It should be recalled that the Chairman, Technical Sub-Committee on Domestic Sales of Crude Oil and Refined Products in Naira, Zacch Adedeji, had clarified that the naira-for-crude oil policy arrangement with local refineries has not been discontinued.
Adedeji, who is also the Executive Chairman, Federal Inland Revenue Service (FIRS), said that after implementing the policy for some months, evidence abounds that it is the right way to go and it will continue to help the economy.
There were concerns yesterday that the suspension by Dangote Refinery could disrupt the pricing dynamics in the petrol market, which has recently seen decline in retail prices.
Stakeholders said the suspension could also have macroeconomic implications if not immediately checked.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) stated that it could also resort to selling petroleum products in dollars, should the Dangote Refinery make good its threat.
Chief Executive, Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, described the news as a “disturbing development” warning that it would change the dynamics of petroleum products pricing.
“It will significantly change the dynamics of domestic petroleum products pricing,” adding that “the sustainability of the widely celebrated deceleration of petroleum products prices is now evidently at risk. We may see a reversal of the trend.
“There are other macroeconomic implications. For instance, the demand pressure on the foreign exchange (forex) market would be elevated, resulting in an exchange rate depreciation scenario. The foreign reserves may come under pressure. All of these could result in adverse macroeconomic outcomes with profound implications for investors’ confidence,” Yusuf said.
