Private firms in Nigeria can start importing fuel from June 2023 as the Nigerian National Petroleum Company Limited (NNPCL) shifts to cash payments instead of crude oil swap contracts.
Mele Kyari, the Group CEO of NNPCL, made this announcement during an interview with Reuters on June 3.
This transition aligns with President Bola Tinubu’s plan to deregulate the fuel market and ease the government’s financial burden.
A significant change is unfolding in Nigeria’s fuel industry, which has been predominantly controlled by the Nigerian National Petroleum Company Limited (NNPCL).
Starting from June 2023, private firms will be allowed to import fuel, a move that marks the end of crude oil swap contracts and the beginning of cash payments for fuel imports.
The Announcement from NNPCL
Mele Kyari, the Group CEO of NNPCL, announced the change in an interview with Reuters on June 3.
It aligns with President Bola Tinubu’s plan to deregulate the fuel market and reduce the financial burden on the government.
The Shift from Crude Oil Swaps to Cash Payments
For several months, NNPCL has been gradually terminating all Direct Sale Direct Purchase (DSDP) contracts, marking a significant change in the country’s oil trade.
Kyari mentioned, “With private companies handling the majority of gasoline imports, NNPC can make cash payments for its purchases.”
The Impact on Market Conditions
While NNPCL was still allocating crude for fuel swaps for July loading, the quantities were reportedly less than in previous months.
In the March crude oil loadings report, NNPC assigned crude to swap contracts held by consortiums.
A New Opportunity for Private Firms
Kyari informed Nigerians that new players will enter the market due to the recent decision to raise fuel pump prices.
According to him, the subsidy regime that was previously in place hindered investors from entering the market as it did not guarantee repayments for those who provided the product at subsidized prices.
The Deregulated Market: A Boost for Competition
Kyari suggests that with the market now regulating itself, oil marketing companies can import products or produce locally.
They can introduce the product to the market, sell it, and recover their investments.
write more lean:
NNPCL’s Future Role
By law, NNPCL cannot control more than 30% of the market.
Kyari believes that as the market stabilizes, other oil marketing companies will step in to fill the void.
This transition will result in a more diverse and dynamic fuel industry in Nigeria.
Recent Legislative Developments
Recently, Nigeria’s House of Representatives instructed the Federal Government to suspend all Direct Sales Direct Purchase (DSDP) contracts, following the removal of the fuel subsidy by the Tinubu administration.
This move further solidifies the shift towards deregulation and more market participation from private firms.
This impending deregulation signifies a monumental shift in Nigeria’s fuel industry.
As private firms get ready to import fuel as early as June 2023, we are likely to witness a more competitive and vibrant industry.
It is an exciting time for all stakeholders in the Nigerian oil and gas sector as we anticipate the dawn of a new era.
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