The Chairman of the Federal Inland Revenue Service (FIRS), Zach Adedeji, announced that the federal government will reduce monthly spending on petrol imports by a staggering $610 million by supplying crude oil to Dangote refinery and other local refineries in naira.
Adedeji made this statement on Monday following the approval from the Federal Executive Council (FEC) that trade among local refineries be denominated in naira with immediate effect.
Adedeji said about $660 million is spent monthly on fueling importation, amounting to about $7.92 billion every year.
He said this new deal will reduce the pressure on foreign exchange, as the government will save the total of $610 million monthly and approximately $7.92 billion annually.
“With this approval today through FEC led by Mr President, this has been reduced by a minimum of 90%. Because of what we have today, the transaction will now be down in our local currency not only to Dangote Refinery but to all local refineries for all our local consumption and this will stabilize the pump price.
“This will also make economic stability a reality because there will no longer rely on the fluctuation in forex.
“Just to be specific, in terms of benefits, one which is major is the reduction in foreign exchange pressure. We utilize $660 million per month, totalling $7.92 billion annually.
“With the new approval that we have, this will reduce to a maximum of $50 million per month which is annualized to be only $600 million. This is a total reduction of 94% and saving us $7.32 billion,” the FIRS boss said.
Backstory
Nairametrics earlier reported that the Federal Executive Council (FEC) approved President Tinubu’s proposal to sell crude oil to Dangote Refinery and other upcoming refineries in Naira.
The federal government aims to stabilize fuel pump prices and the dollar-naira exchange rate with this announcement.
Dangote Refinery currently requires 15 cargoes of crude annually, amounting to $13.5 billion. The Nigerian National Petroleum Corporation (NNPC) has committed to supplying four of these cargoes.
Under the new directive from the Federal Executive Council, the 450,000 barrels of crude earmarked for domestic consumption will be sold to Nigerian refineries in Naira, with Dangote Refinery serving as the pilot for this initiative.
The exchange rate will be fixed for the duration of this transaction.
Afreximbank and other Nigerian settlement banks will facilitate the trade between Dangote Refinery and NNPC Limited.
This intervention aims to eliminate the need for international letters of credit and is expected to save the country billions of dollars currently spent on importing refined fuel.
What you should know
Dangote Refinery has been in an extended conflict with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the government-owned NNPC Ltd,
The management of the 650,000 barrel-per-day refinery has also claimed that International Oil Companies (IOCs) have been attempting to undermine its success.
Following numerous interventions and criticisms from Nigerians, the media, private sector organizations, and prominent figures such as the President of the AfDB, Femi Adesina, as well as support from billionaires like Femi Otedola, the government felt pressured to address the issue.
Nairametrics understands that a deal was finally reached last week after the intervention of President Tinubu, thus concluding the dispute over who will determine the future of energy security in Nigeria.