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Nigeria grants indigenous refineries currency flexibility in crude oil procurement

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In a significant policy shift, the Federal Government has yielded to the demands of domestic crude oil refiners and industry stakeholders by allowing indigenous refineries to procure crude oil using either the naira or dollar.

This announcement, made on Monday, marks a pivotal moment for the sector, signaling a departure from previous rigidities in transactions.

The Nigerian Upstream Petroleum Regulatory Commission, during a briefing in Abuja, unveiled the updated template for domestic crude oil supply obligations.

This move, in accordance with the Petroleum Industry Act 2021, aims to streamline operations and ensure a consistent supply of crude oil to domestic refineries.

The Chief Executive of the NUPRC, Gbenga Komolafe, emphasised the collaborative effort behind the template’s development, involving key stakeholders from various sectors.

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Komolafe highlighted the intent behind offering currency flexibility, noting that transactions in naira could alleviate pressure on the country’s foreign exchange reserves.

Responding to queries regarding the currency of transactions, Komolafe clarified that payments could now be made in either the United States dollar, the naira, or both.

Modular refineries, comprising 25 licensed facilities with a combined capacity of 200,000 barrels per day, have been grappling with foreign exchange challenges, hindering their ability to procure crude oil priced in dollars.

Eche Idoko, representing the Crude Oil Refinery Owners Association of Nigeria, underscored the urgency of addressing this issue to prevent potential closures.

Idoko stressed the significance of selling crude oil in naira, advocating for measures that would bolster the local refining sector and alleviate pressure on the national currency.

The association’s plea aligns with broader calls for strengthening the domestic refining landscape, ultimately fostering self-sufficiency and reducing reliance on foreign exchange.

As the government navigates these challenges, the decision to grant currency flexibility in crude oil transactions represents a step towards promoting a more resilient and sustainable oil and gas sector.

(Edited by Oludare Mayowa; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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