“Naira Crude Transactions Hampered by Dollar Fees”
The Nigerian government’s push to sell crude oil in naira is facing significant challenges due to the industry’s dollar-denominated regulatory and royalty fees. Although Nigeria’s oil transactions are usually conducted in US dollars, the Federal Executive Council recently approved a proposal to sell crude to domestic refineries, including the Dangote refinery, in naira. This plan involves selling 450,000 barrels meant for domestic consumption in naira, with a fixed exchange rate for the transaction.
However, implementing this policy has proven difficult. Industry experts and government officials are struggling with the complexities, including existing contracts that require dollar payments for royalties, and statutory fees charged by the Nigerian Upstream Regulatory Services Commission (NUPRC) in dollars. These include fees for converting oil prospecting licenses to mining leases and for renewing leases, which range from thousands to millions of dollars.
Moreover, there is a lack of idle crude available for local refineries. The Petroleum Industry Act (PIA) introduces a tiered royalty system based on oil prices, further complicating the shift to naira payments. Experts argue that the government cannot force international oil companies (IOCs) to sell their crude in naira or to specific buyers. They emphasize the need for a regulatory framework to facilitate these transactions and call for centralizing revenue collection to reduce over-invoicing and improve ease of doing business.
The Crude Oil Refinery-Owners Association of Nigeria (CORAN) has confirmed that none of its members have started receiving crude in naira, citing the need for detailed guidelines and stakeholder consultations. The government has yet to address these regulatory and operational hurdles, making the transition to naira-based crude sales a complex and ongoing challenge.
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