Nigeria's President Bola Tinubu has ordered state-owned Nigerian National Petroleum Company (NNPC) to sell crude oil in naira to the newly opened Dangote Refinery (DC World News, 4 April 2024).

The move means that the refinery's operation should no longer be dependent on international letters of credit (L/Cs).

L/C difficulties

The Dangote Refinery in Lagos has encountered difficulties in obtaining international L/Cs, which have been crucial for its operations. These issues have contributed to delays in unloading crude oil shipments and have highlighted broader financial challenges faced by the refinery.

One significant instance involved a cargo of West Texas Intermediate (WTI) crude oil from PetroChina, which was delayed off the coast of Nigeria because the Dangote Refinery had not issued the necessary L/C to guarantee payment.

This situation was further complicated by PetroChina's reluctance to accept oil products as payment, a method previously used by the refinery due to difficulties in accessing US dollars​

Naira lifeline

Now, the Nigerian president has thrown a lifeline to the refinery by ordering NNPC to sell crude to it in naira, according to presidential media aide, Bayo Onanuga.

On his official X account on Onanuga says that "to ensure the stability of the pump price of refined fuel and the dollar-Naira exchange rate, the Federal Executive Council today adopted a proposal by President Tinubu to sell crude to Dangote Refinery and other upcoming refineries in Naira."

International L/Cs not needed

"Afreximbank and other settlement banks in Nigeria will facilitate the trade between Dangote and NNPC Limited," according to the media aide who adds that, "the game changing intervention will eliminate the need for international L/Cs."

"It will also save the country of billions of dollars used in importing refined fuel," he concludes.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.