21 May 2016, Sweetcrude, Abuja – The Federal Government’s has lamented that the continued exchange of 445,000 barrels of crude daily for local refining in what has been called oil swap deal may have affected the federation account allocation to the three tiers of government.
The Minister of Information and Culture, Alhaji Lai Mohammed, who noted this while speaking during a stakeholders meeting with the leadership of the All Progressives Congress in Abuja, said government’s revenue was further affected by the increasing rate of vandalism on oil pipelines which is costing the country about 800,000 barrels of crude oil daily.
Mohammed stressed that the 445,000 barrel of crude exchanged for local refining product in the swap deal called DSDP-Direct Sale Direct Purchase has not really benefitted the country, adding that it was part of the reasoning that informed government’s decision to increase in the pump price of petrol.
According to him, “Why we do not have an option is because the fuel regime before now was based on a process where some licensed oil marketers would go to the central bank and open letters of credit to bring in the fuel but unfortunately the price of crude which accounted for over 70 percent of our fuel exchange crashed from over $100 to under $30. As a matter of fact for some part of this year, we sold crude for $28.
“It’s just like somebody who had been earning N100,000 a month and suddenly his salary is reduced to N30,000 must need to make some very painful adjustments. So, the truth of the matter is that we have to do this because there is a shortage of foreign exchange. We don’t have sufficient foreign exchange to open letter of credit for anybody that wants to bring in fuel.
He added that “Last month, I was informed that the total amount of foreign exchange available to Nigeria was $550 million and NNPC needed $500 million out of it. So, you can see why it’s not working.
“Since October last year, NNPC brought in 90 percent of the petrol brought in till date because all the major and independent marketers have refused to bring in petrol. They said they had no access to foreign exchange and we can’t expect them to buy foreign exchange on the open market and sell 86.50.
“So NNPC had to step in not because it also had foreign exchange. What NNPC had been doing was to exchange the 445,000 barrel of crude allocated daily for local refining and it had engaged in a transparent process called DSDP – Direct Sale Direct Purchase.
“It now gives this 445,000 of crude a day and changes it for petrol to come to Nigeria but even that has its own disadvantages,” the minister noted.