NNPC’s direct petroleum product purchase to commence in March

NIGERIA National Petroleum Corporation (NNPC) will end its Offshore Processing Agreements (OPAs) this month and replace it with a Direct Sale Direct Purchase (DSDP) system. Under the system being phased out, NNPC allocated crude to several companies who in turn imported refined products for the NNPC. However, the system has being criticised for its opaque nature that allowed NNPC to be short-changed by the parties involved in the contracts.
NNPC ended the existing contracts in 2015 and replaced them with new ones still under the OPA contracts. Despite the change, NNPC was still losing a significant portion of its crude revenue to these middlemen, therefore decided to overhaul the entire process and replace it with the DS-DP system. The new system is expected to take effect this month, ending the OPA era.
Analysts say the DSDP system is a more transparent model that will allow for uncomplicated investigation should any allegation of corruption ensue. ‘Given the low price of oil and challenges sourcing foreign currency, it is likely the NNPC will have to allocate more crude to this system to meet local demand as we expect other importers activities to face significant challenges as a result of foreign currency scarcity,’ an analyst at Ecobank said in Lagos. Currently, foreign currency demand by petroleum product importers account for almost 40 percent of total foreign exchange demand at the official exchange rate.