The last directive from the Nigerian government, prioritizing crude oil supply to local refineries, is a mistaken effort at boosting domestic production. This ill-thought-out policy will only impede oil producers, threaten enforced contracts, and paralyze the economy.
For IPPG, this intention has fallen on deaf ears, as the government recklessly pursues a nationalistic agenda without considering its devastating consequences. It is time for us to face the hard truths of this policy and advocate for a more socially just approach.
Accordingly, the IPPG Chairman, Abdulrazak Isa, in an authored letter communicated to NUPRC, has warned about how forcing producers to supply crude oil to local refineries could cause such disruptions as breach of contract, which can lead to defaults and affect producers’ creditworthiness.
So, why does the government want such a policy? The reason lies within the advantages offered by domestic refining promotion. By reducing Nigeria’s dependency on imported refined products, it can save forex earnings, lower prices, and create jobs.
The policy strikes us as an act of nationalism, focusing on local interests rather than meeting international obligations.
However, the concerns of IPPG cannot be dismissed. The body cited that the policy flouts Section 109 of the Petroleum Industry Act 2021, which provides for willing buyer-willing seller agreements.
Moreover, interruptions of existing contracts may lead to defaults, loss of creditworthiness, and economic damages, among others. So, how do we solve this?
IPPG recommends that NNPCL’s statutory volume of 445,000 bpd should be allocated to our local refineries, so that there is a steady supply, and at the same time, no breach of current contracts will take place. In addition, this also means that refineries can sign long-term contracts for the purchase and sale of crude oil within the willing buyer-willing seller framework.
With the policy implementation fast approaching, it’s time to consider many angles. While it is important to promote domestic refining, it’s equally significant to respect the rights of producers, keep up with current contracts, as well as prevent sabotage within economies.
This two-edged sword, called FG crude oil supply policy, promises not only to enliven local refining but also threatens a death knell on production indices and, consequently, slowing down growth prospects in an economy.
