April 21, 2024

Expert urges FG to sell 445,000 reserved oil barrels to ease forex volatility for marketers, stabilize fuel pump price

Ad Electricity customers must insist on tariff downgrade from DisCos for insufficient supply hours- NERCd a subheading - 1

 

Oredola Adeola

 

The Nigerian Government has been urged to sell the daily allocation of 445,000 barrels of crude oil for domestic refining and use the proceeds to import refined petroleum products through licensed petroleum marketers in Nigeria. 

This suggestion was made by Dr. Abiodun Adedipe, Chief Consultant at BAA Consult, while speaking on the theme: “Nigeria: Reasoned Response to Fuel Subsidy Removal- What, Why and How?,” during a training program for media practitioners organized by the Major Oil Marketers Association of Nigeria (MOMAN). 

According to Dr. Adedipe, now that fuel subsidy has been legally removed based on the Petroleum Industry Act (PIA), the government should focus on addressing macroeconomic issues, such as easing foreign exchange challenges faced by petroleum product importers. 

He proposed that the daily allocation of crude oil for domestic refining should be sold, and the proceeds should be used to import refined products through licensed marketers. 

This recommendation comes in light of the foreign exchange crisis faced by oil marketers, which has contributed to the increase in the pump price of petrol in Nigeria.
The high logistics and exchange rate costs have put pressure on their operations, as most of the marketers have to access foreign exchange for imports at N879.36, a higher rate, against the United States dollar.
Dr. Adedipe believes that implementing this measure would drive down the cost of importing petroleum products and reduce the volatility of pump prices.

 

By exchanging crude oil for refined petrol through licensed oil marketers, importers would be less exposed to the forex crisis, leading to a more stable pump price.

This arrangement can be sustained until Nigeria aims to end imports of petroleum products with the refurbishment of existing refineries in Port Harcourt, Warri, and Kaduna, as well as the formal take-off of the Dangote and other refineries to cater to domestic demand.

Dr. Adedipe also emphasized the need for the government to aggressively promote alternative energy sources to mitigate the socioeconomic impact of pump price volatility.

 

It is worth noting that Nigeria has been working towards reducing its reliance on imported petroleum products. The country aims to end imports of petroleum products by the third quarter of 2023, with the refurbishment of the Port Harcourt refinery and the expected completion of the Dangote refinery.

 

The government’s focus on modernizing and expanding the domestic refining capacity aligns with the goal of achieving self-sufficiency in petroleum product production.

 

EnergyDay gathered that Adedipe’s suggestion to sell the daily allocation of crude oil for domestic refining and use the proceeds to import refined petroleum products through licensed marketers can be implemented alongside efforts to refurbish existing refineries and establish new ones to meet domestic demand for petroleum products.