The dispute with Dangote refinery stems from the Nigerian National Petroleum Company (NNPC) Limited’s naira-for-crude policy requiring local refiners to purchase crude oil in naira instead of dollars, an initiative aimed at stabilizing foreign exchange reserves.
While the deal was in effect, the refinery sold Premium Motor Spirit (PMS) to Nigerian marketers in naira because it purchased crude in the local currency under its agreement with NNPC.
However, with the deal set to expire this month, The Cable reports that the refinery has announced plans to halt the loading of petroleum products for the Nigerian market, as negotiations to renew the naira-for-crude arrangement have not made significant progress.
NNPC moves to resolve naira-for-crude deal
Following the expiration of the initial naira-for-crude deal, Business Insider Africa earlier reported that the Nigerian National Petroleum Company (NNPC) Limited confirmed ongoing negotiations for a new agreement with Dangote Petroleum Refinery.
NNPC’s Chief Corporate Communications Officer, Olufemi Soneye, stated that the initial agreement was structured as a six-month contract, set to expire in March 2025.
This development comes amid concerns that Nigerians may face another hike in petrol prices after reports emerged that NNPC has halted its naira-for-crude deal with Dangote and other local refineries.
Impact on Dangote Refinery
The Dangote Refinery, which has a production capacity of 650,000 barrels per day, is a critical player in Nigeria’s efforts to achieve self-sufficiency in petroleum products.
However, the unresolved naira-for-crude arrangement has created uncertainties regarding crude supply, potentially delaying the refinery’s full operations and limiting its ability to distribute petrol domestically.
Analysts warn that Dangote’s reluctance to supply the Nigerian market could exacerbate fuel scarcity and increase dependence on imported refined products, undermining the country’s energy security goals.
With the deal now coming to an end, there are fears that if local refineries, including Dangote, are forced to source crude in dollars, production costs could rise significantly.
This shift could put additional pressure on the naira and ultimately lead to an increase in petrol pump prices.
The situation further highlights the broader challenges in Nigeria’s oil and gas sector, including foreign exchange volatility and regulatory uncertainties, which continue to impact investment and operational efficiency.
If the deadlock persists, the Nigerian government may have to negotiate new terms to ensure that the Dangote Refinery remains a reliable source of petroleum products for the local market.
