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00:00Hello and welcome to Guardian Talks. My name is Fadimo Rachel and today we will be having
00:15a very interesting conversation on the suspension of the Naira for crude policy. Recall in October
00:222024, the federal government of Nigeria introduced the Naira for crude policy in order to enable
00:28local refineries to buy crude in Naira, which in turn will boost the foreign exchange rate of our
00:33currency and also reduce the reliance on foreign oil products. However, in March 2025, the Dangote
00:41refinery stated that it would no longer be running its operations under the Naira for crude policy.
00:47And why is that? Because there seems to be an apparent mismatch in buying crude in dollars
00:52and earning revenue in Naira. In response to this, the spokesperson of the Nigerian National
00:59Petroleum Company Limited, NNPCL, Mr. Olufemi Shoneye, denies that the Naira for crude policy
01:06has been suspended. In his words, the Naira for crude policy is still very much active
01:12and NNPCL has been supplying oil products to Dangotee. With this drama going back and forth
01:18between the NNPCL and Dangotee, what was the average Nigerian stance to gain or lose in all of this?
01:25Could the recent Ikin fuel price be as a result of this out in operation by the Dangotee refinery?
01:32Joining us live to discuss this section is a business editor at The Guardian, Mr. Jeff Ayase.
01:39Thanks for joining us. It's my pleasure, Richard. Now, to begin with,
01:43with this back and forth going on between the NNPCL and Dangotee, can you give us a candid opinion
01:50of this whole issue? I want to believe that we are going to get over this phase.
01:56And I believe so much that this policy was timely and this policy was very necessary.
02:04It tried to resolve the issues around FX crisis and petroleum products. While it is important,
02:14we need to situate the crisis properly. You will understand that. But much of our SPEDE,
02:21of our FX SPEDE is all refined products. When I mean refined products, I'm talking about PMS,
02:28we talk about this and other buying products of crude. So that puts a lot of pressure on the demand for FX.
02:39So I think it was on this basis that the government came up with what it called for crude. You will
02:47understand that globally, the business of petroleum is dollarized. If you're buying, you're SPEDE is a
02:56dollar. You're also in most cases selling a dollar. But because we were able to have some of our local
03:05refinery produces starting from last year, the government, in its own wisdom, you will understand
03:12that last year was a tough year for this industry. It was tough. We had a back effort of products. We saw
03:20products rising from around, I think, about 460 or thereabouts to well over 1000. There was so much
03:31of 32. There were so much issues in the market. There were also a lot of disruption in the supply chain.
03:39So the government came up with this. And what was it supposed to do? One, it was supposed to reduce
03:46pressure on FX. This is how it was supposed to work. Instead of the other refinery buy products,
03:57a dollar, the government will sell to them in NARA. They will also have obligation to sell to an NPC
04:05and other marketers in NARA too, a local currency. In that way, you are reducing the pressure on FX.
04:14You are also reducing the demand on FX. Imagine that that gote, which is of pressure, if that gote is
04:21producing at full capacity today, that refinery is 650,000 barre per day. I think it's currently doing
04:32about 400,000. So imagine that that gote is going to buy 400,000 barre of oil, of crude, a dollar. How much would
04:43they need to source from the market? It means that that gote is demanding low. We have a huge impact
04:50on the demand, which would be a lot of, I mean, which is going to create a lot of distortion in the
04:55market. So these were some of the crisis the government working through NNPC was trying to resolve.
05:03But what we have today, I'm not sure it's so special. And again, this also comes,
05:08when we say the government does not communicate clearly, this is a typical case of government
05:15not coming out, I mean, not coming out at the right time to communicate its intention.
05:23This program started October. So it headed last month. Why has the government not come out
05:30hopefully to say, we have renewed this program, or we are not renewing it? That creates a lot of
05:36uncertainty. But in any case, it's a good program. Even though a lot of us still believe, a lot of people
05:44still believe that the government could do much more to address the crisis in the FX markets.
05:52I believe the way to, I mean, because this is still more, this default or the demand approach
05:58to FX management. Government could have done a lot of, I mean, could have done a lot in terms of policy to
06:05open up the process, I mean, to open up the industrial space, so that Nigeria will be able to produce a lot
06:13of the things we import. In that case, the scarcity around, I mean, around FX will reduce. Or we also have
06:23value. We try to invest the processes, invest in exports, I mean, invest in, invest in export programs,
06:31so that we'll be able to export much more than we are currently exporting, and be able to earn,
06:37and be able to earn dollars. Because if you interrogate the policy in itself, if you interrogate the
06:43crude, I mean, the narrative of crude policy in itself, it's not, it's not a magic wand to the crisis
06:52we have in FX. While you are creating opportunity for refinery operators to buy crude from you,
06:58in local currency, that, in a way, it's also denying you the opportunity of earning more,
07:07in terms of FX. Because what you said today, what you said to Dargote at other refinery,
07:13in local currency, you cannot earn FX or dollar on it. So, it's going to reduce your earning in FX,
07:22while it also reduces the demand for FX. It is more or less like an equation. It now depends
07:28on where you are losing more and where you are gaining more. That will determine whether it's,
07:34whether the policy itself has a net, whether the policy itself has a net positive or the FX supply,
07:41so to say. We heard the report from SIP Global that from the beginning of the year to date,
07:47year to date, Dargote has been able to scale up to 400,000 barrels per day. Out of the 400,000
07:55that he produced by day, he put about 35 percent. He doesn't pay Nara or those fee stock, I mean,
08:05he put on the crude. He pay in dollar. He pay in FX. And what he got to say is that,
08:12if he supply, assuming that he supply only in Nigeria markets,
08:16he sells all his finished products in Nara, how does he get dollar to pay for his international
08:24obligation? So, this is where the mismatch is. To get dollar to pay for this, you also need to earn
08:34as much of his revenue, or at least a large chunk of his revenue need to come in dollar, not just Nara.
08:41This is where the mismatch is. He's a businessman. If I were an issue, that is what I would do.
08:47I'm not going to do anything different. The only way we can get Dargote, as of today,
08:52the only way we can get Dargote to produce, as said, 100 percent in Nara, in local currency,
08:58is to supply 100 percent of his fee stock. And we also need to charge him in Nara, not dollar.
09:06Even at that, he would still need a significant proportion of his revenue to come in dollar to
09:18be able to pay. Because don't forget that crude is just part of the oppression. Crude purchase is
09:27just part of his procurement. There are other procurements he makes, which are also in foreign
09:31currency. He needs to pay for some of those procurements. All right. So, Mr. Yase,
09:37one of the reasons the Nara for crude policy was introduced was so as to strengthen the Nara.
09:44I mean, can you explain to us the whole dynamics of that? And why was this policy considered as a
09:49game changer? Okay. Thank you. It's a game changer for one or two reasons. Number one,
09:58it is supposed to stimulate local refining. Because if you are going to be refining locally, one of the
10:12challenges you're going to face is your ability or inability to source for fee stock. Last year,
10:20or last two years, I mean last year, when dark shortages took off, there were reports that it was having
10:26an issue with Getty crude. And there were also reported that it was a putting much of the crude
10:33they were using from different parts of the world. That comes with a lot of costrae. That comes with a lot
10:38of logistic costrae. That comes with a form of currency, saucy costrae, FX costrae, and a lot of other
10:49challenges. So, if we have a policy that was supposed to address some of this costrae, for me, it's a game changer.
10:57And it was also supposed to reduce pressure on FX demand. We have quite a lot of activities at the
11:08midstream, refinery, a lot of refineries, modular refinery, and the rest of them are coming up.
11:14They are all going to be demanding for FX. But if you have a policy that says, guys, you can get
11:22your crude, which is your major raw material to run a refinery. If you can get this crude,
11:31I pay a local currency, which you are going to sell. It makes a lot of sense. It makes a lot of
11:40sense because on a daily basis, you are not going to be running to FX market to look to source for
11:48dollar. And don't forget that dollar is, as I earlier said, dollar is not readily available for
11:53you. It also means that you will not be saucy for dollar. That is number one. Then number two,
12:01there is no crisis of conversion. You earn your income or your revenue in Nara, straight away,
12:12you are able to pay for your crude. That makes the system, that makes the process very seamless.
12:18So the demand, that is where the, I mean, that is where the major, the, the, that is where we are
12:24supposed to have the major benefit as a country. That we are not going to have much demand coming from
12:32this critical set of the economy, which is petroleum. We are not going to have much demand coming from
12:39refinery. But the challenge we've had is, before this policy came, I mean, before this policy was
12:46initiated, the government was committed, had a lot of committed to foreign, I mean, to foreign partners.
12:55Some of the crude we produced were already tied to some lows. It therefore means that it was difficult
13:01for the government to be able to get crude, for an NPC, to be able to get crude for this, for the
13:09refineries, to be able to get crude for the refinery to pay in Nara. Apart from that, there were also
13:15petty commitment, efforts commitment, that we were supposed to service, that we were supposed to fulfill,
13:23using the crude, using the honey we get from oil. Those also became a challenge. Before it also began to
13:30recalibrate his marketing process to say, I can no longer sell in Nara anymore. I have an obligation to
13:40fulfill. And that was what he just did. Yes, it's a game changer. But like I said, we are discussing
13:48Nara for crude. But if we're looking at the whole spectrum of FX market, there are a lot of things we
13:55can do. How much effort are we putting to increase in our supply? Now crude is considered as one of the
14:04major forex earners in Nigeria. Now that Dangote is moving away from selling crude products in Nara,
14:10how does this affect the value, the exchange rate system of our currency? I think there's a
14:17disorder study. The decision Dangote to critique is, it was a response to the correct reality.
14:29That reality might change tomorrow. Imagine what this will, imagine how Dangote will receive
14:37a decision by the government today to say, whatever you need to supply, whatever you need to refine or
14:50to run your refinery, we're going to provide, we're going to supply. And you pay an NPC or whoever you're
14:58going to pay, you're going to pay in Nara. I'm sure that decision will change.
15:02It will also mean that Dangote will be able to refine and he will be able to send to Nigeria in Nara.
15:12Possibly, if he's able to meet the local market, whatever is left, he can also export. And when he
15:19exports, he earn foreign currency. And that also comes to Nigeria as an ejection. It comes to our FX,
15:26it comes to our account as an ejection. That would be positive for the market.
15:33And I also don't think that the government will not want to continue with this. Perhaps,
15:37of course, we are old enough to know that this is the way the government,
15:42Nigeria government, or fortunately, this is the way we work. We wait till things are a bit late before we
15:48take decision. Or we wait till people begin to make demand before we respond. I'm sure in a matter of
15:56days or weeks, we are going to hear a definite policy pronouncement from the government. I'd also
16:03forget that we have a new leadership at NNPC Limited, which has Zoom office today.
16:09I'm sure this could be one of the major policies, one of the major issues the new group manager
16:17director is going to respond to. I have no doubt that we are going to hear from him very soon on this.
16:22But perhaps, if the situation continues, and that would continue to sell his product in NARA,
16:32it means that most of the marketers that buy from him, we have to source for FX.
16:37We have to source for a dollar from perhaps from the official market or even from the black market.
16:47And that would mean a lot of pressure on the market too. It could also mean that NARA is going to
16:52continue to lose value. It's going to continue to depreciate, which could also translate to higher
16:58prices through feeding effect. It could also mean higher prices of products.
17:07Thank you. Sorry to bolt into your line of thought. Now, you said something earlier in our conversation.
17:12You said that there seems to be like the government is backstepping from the policy. Would you consider
17:18this as political? There's a strong link between whatever we do at politics. And don't forget,
17:26that is the issue I have with the former GMT of NNPC. Because last year, we've seen him politicize
17:35a lot of the policies, a lot of issues. We've also witnessed a lot of confrontation between the NNPC in
17:44his time, between NNPC and Dagote. Not all default for anybody, but as a regulator, you need to be
17:52extremely professional. If you're not professional,
17:56much of the decisions you're taking, much of the policies perhaps are not going to have the desired
18:04results. And if you need investors or you need the market to have confidence in you, to have confidence
18:12in the sector, you need to be very professional. I may not be able to see the certainty that this is
18:20political. Perhaps we just give the government the benefit of that. But I think whatever be the case,
18:28the government is too slow in responding to this. If those issues, which are the baseline of all of
18:34these discussions are political, that Dagote openly cried out that the Kabaaz, the Oe Katae were after him and all
18:42of that, why should we doubt that this is not so political?
18:48All right. That was quite deep. Finally, I mean, Nigerians out there, our audience out there,
18:56they'll be thinking in their minds that, I mean, how does this policy affect the average
19:02Nigeria? In terms of prices of food and services, transport and what have you? How does it affect
19:09the average Nigeria? It's going to affect us in different ways.
19:14Well, historically, we've known that the prices of petroleum products are like falling knives on
19:26Nigerians, heavy Nigerians. Each time the prices go up, it's like you are stabbed. You are stabbed because
19:33you are going to pay more for transport fare. You are stabbed because the worst prices of transport goes up
19:45The prices of food in the market will also go up because the woman selling in my two market will
19:51tell you that I brought this, I pay transportation to bring these items to the market. It's going to
19:59charge more. If this crisis also continue, we are going to see the price, perhaps the price of this,
20:07their PMS might go up. We might see price of PMS going up to about what has that, what has that,
20:13what we saw last year. Of course, since Dagote made that announcement, we have seen prices increase
20:20by close to 100 Naira. What does that tell you? It's a point out to what we're going to see if we
20:26don't resolve this. And what's the prices of, because there's a strong correlation between the prices, between
20:32prices of petroleum products and general prices in the market. What's the prices of petroleum is, of
20:40petroleum products going up? Of course, the cost of production will go up. The cost of movement of
20:46logistics, the cost of logistic, the cost of haulage will go up. And the prices of items, general prices of
20:52items will go up. Then you begin to talk about inflation. Except we address it, and address it now with this
21:00patch, you are going to see the ripple effect across board on inflation, especially the prices of food, prices of
21:10prices of transport. At once price of food and transport are going up, sooner or later, it will begin to feed it to
21:18other items.
21:20Wow. This has been such an insightful conversation. You would all agree with me that this suspicion of
21:28the Naira Falkwood policy is not just about fuel. It's about the struggles of an average Nigerian out there.
21:35Trust me, this conversation does not just end right now. You can head over to our website at
21:41guardian.ng or follow us across all social platforms at guardian.ng to continue this conversation.
21:48This topic has been tackled with me with the business editor at The Guardian, Mr. Jeff Ayase.
21:54Once again, Mr. Jeff, thank you for gracing our studio with your presence.
21:58Thank you for having me, Rachel. My pleasure.
22:00Call me away next time. I remain fighting with Rachel. Bye for now.