The Federal Government is hoping to save about $7.92 billion annually from the sale of crude oil to the nation’s local refineries in naira and thus reduce the pressure on foreign exchange.
This followed the approval on Monday by the Federal Executive Council (FEC) for trade among local refineries to be denominated in naira with immediate effect
The Chairman of the Federal Inland Revenue Service (FIRS), Zach Adedeji, disclosed this to correspondents after the meeting of the council presided over by President Bola Tinubu on Monday, saying that about $660 million is spent weekly on fuel importation, amounting to about $7.92 billion every year.
He said that the denomination of transactions will stabilise the pump price and make economic predictability reliable.
According to him, it is an innovation geared to solve the country’s problem.
He also disclosed that AFRIBANK has been approved as a settlement bank between Nigeria National Petroleum Company Limited (NNPCL) and Dangote Refinery for this purpose.
The intervention will eliminate the need for international letters of credit and save the country billions of dollars used to import refined fuel.
Adedeji, who is also the Executive Chairman of the Federal Inland Revenue Service (FIRS) stated: “The attitude of Mr. President is thinking outside the box to solve Nigeria’s problem and actually to localise the solutions to Nigeria’s problem.
“He has approved through the Council that effective immediately, NNPC get engaged with local refineries and we are starting that with Dangote Refinery, that the sales of crude oil to Dangote Refinery be denominated in naira and also the sales of byproducts from Dangote Refinery to distributors also be conducted in naira.
The FIRS boss added: “With this approval today through FEC led by Mr President, this has reduced by a minimum of 90 percent. Because 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 actually stabilize the pump price.
“This will also make economic stability a reality because there will no longer rely on the fluctuation in forex.
“Once again, this is an innovation of solving our problem as a country today.
“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.
“This will also reduce finance costs, which today stands at $79 million. When you consider opening letters of credit between those local refineries and what happens?
“And also, the Council has approved the settling bank to be AFREXIM. It will be the lead arranger between NNPC and Dangote Refinery.
And what does it mean to our economy? One, the pressure on foreign exchange will be reduced.”
“So, this is a major innovation in solving Nigeria’s problem permanently. Not only will we have more employment but we will definitely be in charge of one of our mainstay of our economy.
“So, I congratulate the council members, Mr. President, and also congratulate the operator, the NNPC and Dangote Refinery and also the lead arranger, AFREXIM Bank because kudos should go to the President of the African Export-Import Bank, Prof. Benedict Oramah for these initiatives, because these are people that work behind the scenes to make sure that what we witnessed today, happened.”
