By Aliyu Yusuf
I was a young boy in the ’1990s, but I’ll never forget my late uncle playing the legendary Fela Kuti on his old cassette player. One song that always stood out was “Water No Get Enemy.” Fela’s voice would fill the room as he sang about the essential nature of water, a resource so vital that it has no enemies. But even water, as indispensable as it is, can become a tool of exclusion when mismanaged. Today, as I reflect on the Nigerian National Petroleum Company’s (NNPC) decision to suspend the naira-for-crude oil swap deal with domestic refiners, Fela’s words feel more relevant than ever.
The naira-for-crude deal, launched in October 2024, was a bold attempt to support local refiners by allowing them to purchase crude oil in naira instead of dollars. It was a policy designed to ease pressure on foreign exchange reserves, boost domestic refining capacity, and reduce Nigeria’s reliance on imported petroleum products. For a country that exports crude oil but imports nearly all its refined fuel, this was a step in the right direction. But now, with the NNPC’s sudden suspension of the deal, that progress is at risk. Refiners like Dangote, Waltersmith, and BUA will now have to source crude oil from international markets, paying in dollars. This shift not only increases their operational costs but also threatens to delay the operational timelines of these refineries. For Nigerians already grappling with rising fuel prices and economic uncertainty, this decision is a bitter pill to swallow.
The NNPC claims that the suspension is due to its crude oil production being tied up in forward contracts, leaving no supply for domestic refiners. But this explanation feels flimsy at best. If Nigeria’s crude output has reportedly increased since the deal began, why is there suddenly no crude available for local refiners? Is this a case of poor planning, or is there a deeper issue at play? Critics argue that the NNPC’s decision reflects a troubling pattern: a lack of commitment to supporting domestic industries. For years, Nigeria has talked about reducing its reliance on imported petroleum products and boosting local refining capacity. Yet, every time a policy is introduced to achieve this goal, it seems to be undermined by conflicting priorities or bureaucratic inefficiencies.
The suspension hits the Dangote Refinery particularly hard. Owned by Africa’s richest man, Aliko Dangote, the refinery has been hailed as a game-changer for Nigeria’s energy sector. With a capacity of 650,000 barrels per day, it was expected to not only meet Nigeria’s domestic fuel demand but also position the country as a major exporter of refined petroleum products. But without access to affordable, locally sourced crude, the refinery’s operational timeline and profitability are now in jeopardy. This is a stark reminder that even the most ambitious projects can falter without the right policy environment.
The suspension of the naira-for-crude deal has far-reaching consequences for Nigeria’s economy. The naira, already under pressure, could face further devaluation as refiners turn to the forex market to source dollars for crude oil purchases. This, in turn, could drive up inflation, making life even harder for ordinary Nigerians. Moreover, the decision undermines efforts to achieve self-sufficiency in petroleum production. Instead of supporting local refiners, the NNPC seems to be prioritising short-term gains from forward contracts over long-term energy security. This short-sighted approach is all too familiar in Nigeria’s energy sector, where quick fixes often take precedence over sustainable solutions.
The NNPC’s decision is a step in the wrong direction, and it’s time for stakeholders to demand accountability. Why is the NNPC not prioritising domestic refiners, especially when the Dangote Refinery is on the cusp of transforming Nigeria’s energy landscape? Why are we not leveraging our crude oil resources to build a robust domestic refining sector that can create jobs, reduce fuel imports, and stabilise the naira? These are questions that need answers. Nigeria’s energy sector is at a crossroads, and the choices we make today will determine whether we finally break free from the cycle of “suffering and smiling” or continue to stumble from one crisis to the next.
Fela Kuti once sang, “Suffering and smiling… that’s the Nigerian style.” But it doesn’t have to be this way. The suspension of the naira-for-crude deal is a setback, but it’s also an opportunity to rethink our approach to energy policy. Let’s hope this time, we get it right.
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