Dumebi Kachikwu, the presidential candidate for the African Democratic Congress (ADC) in the 2023 elections, recently discussed the ongoing challenges within Nigeria’s oil sector. He claims that the Nigerian government has already forward-sold much of its crude oil, leaving domestic refineries with insufficient allocations to meet their needs.
In an interview with ARISE NEWS, Kachikwu explained the root cause of the issue amid a dispute between the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and Dangote Refinery. Dangote had expressed concerns about not receiving the promised 29 million barrels of crude oil. Kachikwu downplayed the significance of the dispute, stating that while Dangote’s refinery is the largest in Nigeria, there are other government-owned and smaller private refineries like Walter Smith.
Oil Forward Sales Affecting Domestic Supply
Kachikwu pointed out that previous loan agreements entered into by the government, especially under the last administration, led to forward oil sales. This means that the oil Nigeria produces is already committed as collateral for these loans, reducing the available supply for local refineries.
He also stressed that the issue isn’t about sabotage but a consequence of how the industry operates, noting that Dangote’s refinery can source oil globally, as can other refineries, as long as they can afford it.
Every year, Kachikwu said, the Nigerian National Petroleum Corporation (NNPC) enters into agreements with various international refinery marketers, selling them crude oil in advance. This process further complicates the availability of oil for domestic refineries, especially outside of scheduled allocations.
PIA and Local Refinery Concerns
Kachikwu also addressed the Petroleum Industry Act (PIA), which mandates that local refineries have access to Nigerian oil. However, he explained that the PIA is not specific about how much crude should be allocated to each refinery. According to him, the PIA doesn’t guarantee that any refinery will receive all the crude it needs from Nigeria’s domestic reserves.
He also pointed out that the oil industry operates differently around the world, with many countries lacking domestic oil production yet still maintaining refineries. This further highlights that refineries don’t solely rely on domestic crude.
Summary
Kachikwu emphasized that Nigerians need a clearer understanding of the situation and should not focus on what he considers “non-issues” like the current dispute between NUPRC and Dangote. The real issue, according to him, lies in the country’s oil management practices and the impact of forward-sold crude on domestic refineries.
