The refinery CEO/MD says the Naira-for-crude arrangement is not a fuel subsidy
The Chief Executive Officer and Managing Director of the Dangote Petroleum Refinery, David Bird, has again raised concerns about the shortage of domestic supply of crude oil to the refinery.
Bird said the 650,000-barrels-per-day refinery is only getting about 30 per cent of the expected crude supply for its feedstock under the Naira-for-crude deal.
Bird, who appeared on Arise News on Wednesday, stated that out of about 13 to 15 cargoes of crude the refinery is supposed to receive from the Nigeria National Petroleum Company (NNPC) Limited, under the Naira-for-crude deal, only five cargoes have been received monthly.
He clarified that the Naira-for-Crude arrangement is neither a price-fixing regime nor a subsidy, stressing that it is based on an international price benchmark, and only those transactions are in naira, removing foreign exchange implications.
“From what we see under that agreement is that we should be getting about 13 to 15 cargoes every month and that’s what we could process to meet the domestic fuel requirement of Nigeria. Currently, we are only getting five,” Bird stated. “So that’s an underperformance of that pre-agreed volume contract.”
He further stated that Nigeria has a variety of crude grades and they often submit preferences, but not only do they not get full allocations, but also don’t get the grades ordered. He alleged that some of the crude grades denied them locally, unfortunately, find their way into the international market, where they are bought at a premium.
“So, 30 per cent of Naira-for-crude we get allocated with no discount, no subsidy, it is international benchmark pricing, then we have to pay international benchmark freight rates, and freight has also been severely impacted and gone up, insurance rate, etc. There is a misunderstanding that the Naira-for-crude programme is somehow a discount or subsidy; it is not. There is an arm’s length relationship, we purchase those crude, we insure the crude, at international benchmark pricing,” Bird clarified.
He said all the input costs have been impacted by the current Middle East crisis.
He warned that the value between the purchase price and the premium they pay to get the product “is money that Nigeria is leaking to the international trading community, and we believe that’s unnecessary.”
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He urged the authorities to clarify and be transparent on the crude allocation methodologies.
He said the refinery has also recorded about 30 to 40 per cent import of crude from the international market to boost its feedstock, as the refinery has the capability to process a wide variety of crude and supply to the market.
He said Nigerians should be happy that Alhaji Aliko Dangote, in his foresight, built a merchant refinery that is versatile in terms of its ability to process a wide variety of crude. This, he added, gives the refinery the benefit of not relying on one source of crude supply.
On the rising crude prices, which have affected its pricing of refined products, Bird said the refinery is fully exposed to the international market in both crude supply and product pricing, adding that the impact is being felt now, given the ongoing tensions in the Middle East, which have driven up crude prices, freight costs and insurance rates.
“These cost pressures are across the board, not just crude prices, but logistics, shipping and even supplier contracts,” Bird said, adding that such increases inevitably feed into the final cost of refined products.
He assured that the refinery would try to maintain stability in the market within a commercially acceptable range, as the company receives no subsidy.
The refinery CEO called on the government to also review regulatory measures, with a view to how they impact the cost of doing business in the country.
The refinery has adjusted its ex-depot price of petrol about five times in March in response to oil price volatility in the global market due to supply disruption caused by the ongoing conflict in the Middle East involving the United States, Israel, and Iran. In its latest update on fuel pricing, the $20 billion facility raised the gantry price of its Premium Motor Spirit (petrol), from ₦1,245 to ₦1,275 per litre over the weekend, following a further increase in the price of crude oil.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in Mass Communication. He can be reached via @VICTOREZEJA on X
