morgaNABLE politics/Governance
The government also announced plans to sell crude oil forward to domestic refineries to improve supply certainty and minimise the impact of international market volatility on local petroleum product prices
KaNo —
The Crude Oil Refiners Association of Nigeria has endorsed the Federal Government’s proposal to sell crude oil to domestic refineries through forward contracts but warned against imposing a N1,350-per-litre petrol price ceiling without a clear mechanism for recovering additional production costs.
The association said the proposed crude supply arrangement could improve feedstock availability, strengthen domestic refining operations and reduce exposure to fluctuations in international crude oil prices.
However, it cautioned that the initiative must be implemented transparently and on commercially sustainable terms to prevent smaller refinery operators from being disadvantaged.
The development comes amid rising petrol prices across the country, with the product selling for about N1,410 per litre in Abuja, as the Federal Government considers measures to protect consumers from fluctuations in global oil prices and foreign exchange rates.
Last week, the government confirmed ongoing negotiations to introduce a N1,350-per-litre ceiling on the ex-gantry or landing cost of petrol under a proposed price-modulation arrangement.
Under the proposal, refiners and petroleum product importers would initially absorb costs exceeding the ceiling, with provisions to recover the shortfall when market conditions become more favourable.
The government also announced plans to sell crude oil forward to domestic refineries to improve supply certainty and minimise the impact of international market volatility on local petroleum product prices.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed the initiative during a press briefing, explaining that increased crude production and the release of previously committed volumes would support domestic refining operations.
“Foward sales of crude to domestic refineries. As production rises and previously committed crude is freed up, this would shield pump prices from volatility in the global market,” he said.
Reacting to the proposal in an interview with our correspondent on Sunday, the spokesperson for CORAN, Eche Idoko, described forward crude sales as a potentially beneficial intervention but raised concerns about the availability of crude, pricing arrangements and the protection of existing contractual obligations.
“The proposed forward sale of crude to domestic refineries is workable in principle and could provide feedstock certainty and reduce price volatility. However, the critical questions are availability, pricing, transparency and the protection of existing contractual obligations,” Idoko said.
He questioned whether major industry stakeholders had been adequately consulted and demanded clarity on the institutions responsible for administering the proposed arrangement.
“Have OPTS and IPPG bought into this arrangement? Who will administer it, and under what commercial terms?” he queried.
Idoko stressed that the government must develop an inclusive framework that guarantees access to crude oil for both large-scale and modular refinery operators.
According to him, restricting the benefits of the arrangement to major refining companies could undermine the development of smaller domestic refineries and weaken efforts to expand Nigeria’s refining capacity.
“I have consistently advocated affordable crude access for all domestic refineries, including modular refineries, not just the big operators. Any framework must be inclusive, commercially sustainable and properly coordinated by NUPRC and NMDPRA,” he said.
However, the CORAN spokesperson strongly opposed the proposed petrol price ceiling, questioning its economic justification and the absence of a clearly defined cost-recovery mechanism.
He warned that compelling refiners to absorb production costs exceeding the proposed ceiling could create financial difficulties for operators if the government failed to establish how such expenses would eventually be recovered.
“On the proposed N1,350 ex-gantry price ceiling, I have serious reservations. How was that figure determined? Who bears the difference when production costs exceed the ceiling, and how will the shortfall be recovered?” he asked.
He added, “While price stability is desirable, we must be careful not to reintroduce price regulation or subsidy through the back door.”
Idoko maintained that the government should concentrate on addressing structural challenges affecting domestic refining rather than administratively determining the prices of petroleum products.
He identified increased crude oil production, improved feedstock availability and lower refining costs as important measures for achieving sustainable reductions in petrol prices.
The association’s concerns come amid questions over Nigeria’s capacity to meet the crude oil requirements of domestic refineries while fulfilling existing contractual commitments.
Oyedele recently explained that although Nigeria produces approximately 1.8 million barrels of crude oil daily, the Federal Government does not have unrestricted access to the entire production volume.
He attributed the limited availability of crude for domestic allocation to production-sharing contracts, joint-venture arrangements, production costs and royalty obligations.
“The reality is that today we do not have up to 700,000 free crude to give anyone, including Dangote,” Oyedele said during an interview on Channels Television’s Politics Today.
The minister’s explanation highlights potential implementation challenges for the forward-sale initiative, particularly the need to balance existing contractual commitments with growing demand from domestic refiners.
Industry stakeholders have consequently emphasised the importance of ensuring that any forward-sale framework is supported by sufficient crude production and clearly defined commercial arrangements.
Meanwhile, the Chief Executive Officer of Petroleumprice.ng, Jeremiah Olatide, welcomed the government’s decision, describing forward crude sales as a positive response to concerns raised by downstream petroleum industry stakeholders.
“I am happy that the Federal Government has decided to listen to experts’ advice that there must be a form of intervention through crude supply to the refineries. These forward sales to local refineries are a good move,” Olatide said.
He expressed optimism that improved crude supply arrangements would ease financial pressure on domestic refineries and strengthen their negotiating position when purchasing feedstock.
“It is definitely going to help and ease the pressure on refineries and, with that, I think better negotiation, better price. It is good and shows the government is listening to what stakeholders are doing and taking the right steps, controlling the effect of crude oil prices to the Nigerian downstream market,” he said.
The proposed interventions come as rising petroleum product prices continue to increase transportation costs and place additional financial pressure on Nigerian households and businesses.
However, the difference between the proposed N1,350-per-litre ex-gantry ceiling and Abuja’s petrol pump price of approximately N1,410 per litre illustrates the additional costs involved in transporting, distributing and retailing petroleum products.
The debate also underscores the challenge facing the Federal Government in balancing consumer protection with the commercial sustainability of domestic refining operations.
While stakeholders broadly support measures to guarantee crude supply and reduce exposure to international price volatility, concerns remain over whether the proposed pricing framework can achieve stability without creating additional financial obligations for refiners or effectively restoring fuel subsidies.
