The Nigerian National Petroleum Company Limited (NNPC), on Monday, June 5, announced that it has commenced the termination of all crude swap contracts with foreign refiners.
The crude swap contract, also known as Direct Sale Direct Purchase (DSDP), is an agreement that allows sales of crude oil to foreign refiners and consortium of traders, who will in turn supply NNPC with an equivalent worth of petroleum products.
Recall that NNPC had been importing petrol from consortiums of foreign and local trading firms and repaying them with crude oil through the DSDP contracts since 2016, as it did not have enough money to import on a cash-and-carry basis.
Nigeria, which is Africa’s biggest crude producer, still imports most of its refined petroleum products due to the lack of operations in refineries across the country.
A significant drop in oil production last year, coupled with high global fuel prices due to the war in Ukraine, increased NNPC’s debt to the tune of $2 billion.
However, this development will enable NNPC to take charge and keep track of all the refined products coming into the country.
Mele Kyari, NNPC’s group chief executive officer (GCEO), while speaking on the development, said that the oil company has commenced the termination of crude oil swap contracts and will pay cash for petrol imports.
Kyari noted that the NNPC will now pay for its purchases in cash by terminating the crude swap contracts, adding that less petrol will be imported by NNPC while private companies will import the bulk.
He stated that, “In the last four months, we practically terminated all direct sale direct purchase (DSDP) contracts.
“And we now have an arm’s-length process where we can pay cash for the imports.”
He added that the move is part of President Bola Tinubu’s plans to deregulate the petrol market and reduce the burden on government finances.
It is pertinent to note that this development comes less than two weeks after Tinubu announced the removal of subsidy on fuel.
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