The Nigerian Senate has shown confidence in the decision to let the Nigerian National Petroleum Company Limited (NNPC) to sell crude oil in local currency (naira) to the Dangote Refinery, a facility with a daily processing capacity of 650,000 barrels. This action, which was endorsed by President Bola Ahmed Tinubu at a Federal Executive Council (FEC) meeting, is viewed as a calculated attempt to fortify the Naira and lessen the nation’s reliance on foreign currency.
According to Zacch Adedeji, the chairman of the Federal Inland Revenue Service (FIRS), this policy is anticipated to boost local currency transactions and the domestic sale of crude oil, stabilizing the naira and saving the nation billions of dollars on fuel imports. The Senate Finance Committee applauded this decision, citing it as a major step toward promoting growth, supporting local industry, and achieving economic self-sufficiency. Other Civil Society Organizations (CSOs) including the Arewa Think Tank (ATT) have also offered their assistance.
Creation of development commissions for North-West and South-East areas.
Concerning the supposed NNPC sabotage of the Dangote Refinery, they see the judgment as a good step in the right direction. The policy’s wider ramifications, such as its ability to stabilize fuel costs and lessen pressure on the dollar-naira exchange rate, were also mentioned by the groups. As additional proof of President Tinubu’s dedication to the advancement of the country, the administration has also announced the creation of development commissions for the North-West and South-East areas and the signing of a new Minimum Wage law.
In an audacious effort to fortify the local currency, lessen the nation’s need on foreign currencies, and improve economic stability, the Nigerian government decided to sell crude oil to regional refineries, such as the Dangote Refinery, in naira. This action could benefit the Nigerian Economy as a whole in a number of ways, chief among them being the reduction of the foreign exchange outflow of $7.92 billion that is now spent on fuel imports. The policy, however, is not without serious risks and obstacles. The capacity of local refining is one of the main issues.
Dangote refinery is currently increasing its output.
Nigeria’s reliance on foreign petroleum is anticipated to be greatly reduced by the Dangote Refinery, which is anticipated to have the greatest capacity in Africa at 650,000 barrels per day. The refinery is currently increasing its output, but it is not yet clear if it will be able to supply all of the nation’s short-term needs for refined petroleum products. Experts in the field and economists disagree on this policy. Some commend it as an essential move toward Economic Diversification and self-sufficiency, which is critical for a nation that has long depended on oil exports for income.
If effective, they contend, this program may result in lower inflation, a more stable naira, and cheaper fuel costs for the general public. Opponents, including some members of the opposition, caution that the program might not deal with the structural problems with Nigeria’s oil business, which include corruption, inefficiencies, and deficiencies in infrastructure. The ability of the government to maintain fiscal restraint, the stability of the global oil market, and the successful operationalization of nearby refineries are some of the long-term issues that will determine the longevity of this strategy. This policy might promote economic self-sufficiency, mitigate the effects of external shocks, and establish Nigeria as a refined petroleum product hub in the area if local refineries are able to continuously manufacture high-quality products at competitive costs.
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On the international scene, the policy could also have risks, though. Nigeria may be less active in the international oil market, which normally deals in dollars, if it continues to conduct transactions in naira. If foreign parties believe there are greater risks involved in working with a non-convertible currency like the naira, this could impede commerce and discourage foreign investment. Furthermore, price Volatility and supply disruptions could result from any instability in the domestic market or from missing production targets, significantly complicating Nigeria’s foreign Trade connections.