The recent suspension of the naira-for-crude arrangement between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Petroleum Refinery has raised concerns about a looming increase in fuel prices across Nigeria.
In October 2024, the Nigerian government introduced a six-month scheme allowing NNPCL to sell crude oil to local refineries, including Dangote’s, in naira instead of U.S. dollars. The move aimed to reduce pressure on the naira while ensuring a stable supply of petroleum products. However, the arrangement has faced challenges, with NNPCL reportedly struggling to meet its crude supply commitments.
Dangote Refinery, which operates a 650,000-barrel-per-day (bpd) facility, was promised 385,000 bpd by NNPCL but has received significantly less. This has forced the refinery to source crude from international markets, including purchasing 2 million barrels of U.S. WTI Midland crude, to sustain operations.
Dangote Refinery Halts Fuel Sales in Naira
In response to the crude supply shortfall, Dangote Refinery announced on March 19, 2025, that it would temporarily suspend fuel sales in naira. The refinery cited a mismatch between its crude procurement obligations, which are in U.S. dollars, and its sales proceeds in naira as the key reason for the decision.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” the company said in a statement.
While Dangote Refinery has not specified how long the suspension will last, it emphasized its commitment to resuming naira transactions once NNPCL provides an allocation of naira-denominated crude. The company also dismissed online rumors suggesting it halted fuel sales due to fraudulent ticketing practices, calling such claims “malicious falsehoods.”
Fuel Price Hike Fears as Dollar Transactions Resume
The shift to selling fuel in U.S. dollars is expected to have significant economic repercussions. Petroleum marketers have expressed concerns that this move will exert additional pressure on the naira, as local fuel traders will now require more dollars to purchase products. This could lead to a sharp increase in petrol prices, further exacerbating the cost of living crisis in Nigeria.
Since December 2024, Dangote Refinery has made efforts to reduce petrol prices by more than 20% to make fuel more affordable. However, the inability to secure crude in naira has made it challenging to sustain those reductions. Experts warn that without an extension or renewal of the naira-for-crude agreement, fuel prices could rise sharply in the coming weeks.
NNPCL’s Position and Uncertain Future of the Deal
NNPCL has acknowledged the challenges surrounding the naira-for-crude agreement and stated that it is in discussions with Dangote Refinery to explore the possibility of renewing the deal. However, no formal extension has been announced, raising doubts about the feasibility of continuing the arrangement.
Some local refineries have also reported receiving little to no crude under the deal, highlighting broader supply chain inefficiencies. If the agreement is not revived, the Dangote Refinery and other domestic refineries may be forced to rely entirely on imported crude, further weakening the naira and increasing fuel costs.
The Bigger Picture: Nigeria’s Refining and Energy Independence Goals
Dangote Refinery, built by Africa’s richest man, Aliko Dangote, has been widely regarded as a potential game-changer in Nigeria’s quest for energy independence. The refinery was expected to reduce Nigeria’s reliance on imported refined petroleum products, which has historically drained foreign reserves and destabilized the economy.
However, the ongoing crude supply issues highlight the structural problems facing Nigeria’s refining sector. If local refineries cannot secure reliable crude supplies, the country’s goal of achieving self-sufficiency in petroleum products may remain elusive. Experts suggest that the government must prioritize long-term crude supply agreements, infrastructure investments, and policy stability to ensure the success of local refining operations.
As Nigeria navigates these challenges, all eyes remain on the federal government and NNPCL to see whether they can resolve the crude supply issues and prevent further disruptions in the domestic fuel market.
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