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The Nigerian National Petroleum Company Limited, NNPCL, has officially discontinued its naira-for-crude supply arrangement with Dangote Petroleum Refinery and other domestic refineries, a decision that could drive up petrol prices across the country.
The termination of the agreement means that Nigerian refineries, including the much-anticipated Dangote facility, will now have to source crude oil from international suppliers, paying in dollars instead of naira. This shift is expected to escalate operational costs, potentially leading to higher fuel prices at the pump.
According to sources familiar with the development, the NNPCL informed local refiners that it has already committed its crude oil production to forward contracts, effectively leaving no supply available for domestic refineries. This revelation comes despite reports that Nigeria’s crude output has increased since the deal first began.
Nigeria initially launched the naira-for-crude initiative on October 1, 2024, with the goal of improving local refining capacity, reducing the country’s dependence on costly petroleum imports, and stabilizing fuel prices. The policy was particularly aimed at supporting the operations of domestic refineries by ensuring a steady supply of feedstock in local currency.
However, multiple industry insiders say the initiative has been put on hold until at least 2030, raising concerns about the sustainability of Nigeria’s refining ambitions.
A top-level source confirmed that Dangote Petroleum Refinery and other local refiners were officially notified that NNPCL will no longer supply them with crude, as all future production has been locked into forward contracts.
This development comes amid continued struggles in Nigeria’s downstream sector. Despite efforts to boost local refining, the country, it was learned, spent over $4.3 billion importing 6.38 billion liters of petrol and diesel in just five months. The NNPCL itself remains one of the key importers, leveraging the recent deregulation of the sector to continue bringing in refined products.
A separate industry source expressed frustration over NNPCL’s unilateral decision to discontinue the naira-for-crude arrangement, saying it contradicts expectations of lower fuel prices for Nigerians.
While Dangote Petroleum Refinery has yet to release an official statement on the matter, an insider within the company disclosed that management is assessing the situation and weighing its options.
Analysts warn that the abrupt end of the naira-based crude supply arrangement could create instability in Nigeria’s foreign exchange market, potentially reversing recent gains in naira valuation. The move also raises questions about the government’s broader energy policy, given that domestic refining was seen as a key strategy for reducing fuel import dependency.
In October 2024, the Federal Executive Council, FEC, had approved a plan to allocate 450,000 barrels of crude per day for local refining, to be sold in naira. Dangote’s refinery was selected as the pilot beneficiary of the initiative, with an allocation of 385,000 barrels per day from NNPCL. However, the program soon ran into challenges, as NNPCL, it was gathered, struggled to meet its supply obligations.
By November 2024, the Dangote refinery had raised concerns that it was not receiving sufficient crude under the naira-for-crude framework, signaling early cracks in the arrangement. With NNPCL now fully withdrawing from the deal, local refiners may be left with no choice but to seek alternative crude supply sources at significantly higher costs.
This latest development underscores ongoing challenges in Nigeria’s petroleum sector, leaving key questions unanswered about the future of domestic refining and the affordability of fuel for Nigerians.
“We need 650,000 barrels per day, (state oil firm NNPCL) agreed to give a minimum of 385,000 bpd but they are not even delivering that,” Edwin Devakumar, the vice-president of Dangote Industries Limited, DIL, had said.
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