The Nigerian petroleum sector is currently undergoing a significant transformation with the implementation of a new pricing model to oversee operations related to the domestic crude oil supply obligation. According to Section 109(2) of the Petroleum Industry Act, 2021, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has introduced this new pricing model.
The decision to implement this model arose following concerns raised by Momoh Jimah Oyarekhua, the President of the Crude Oil Refinery Owners Association of Nigeria (CORAN), during a meeting with the Minister of State for Petroleum Resources (Petroleum), Heineken Lokpobiri. Oyarekhua highlighted the challenges faced by modular refineries due to undersupply of crude oil and the inability of local refineries to make payments in US dollars, even when crude oil was available.
In response to these concerns and to alleviate pressure on the country’s exchange rate, the Director General of the NUPRC, Gbenga Komolafe, justified the adoption of a new naira pricing model. Conducting transactions in naira is expected to stabilize the exchange rate by reducing the demand for foreign currencies.
The involvement of key stakeholders in the petroleum sector, such as NNPC Upstream Investment Management Services, Crude Oil/Condensate Producers, the Crude Oil Refinery Owners Association of Nigeria, and Dangote Oil Refinery, adds credibility and acceptance to the new pricing model.
The primary objective of this initiative is to foster the development of the upstream oil sector to ensure Nigeria’s self-sufficiency in refined products. This approach is seen as crucial in enhancing Nigeria’s energy independence and contributing to overall economic growth.
By embracing this new pricing model, Nigeria demonstrates its commitment to modernizing the petroleum sector and ensuring operational sustainability through enhanced efficiency and resource management.
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