The Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in naira following the breakdown of negotiations over a naira-for-crude deal with the Nigerian National Petroleum Company Limited (NNPCL).
The move has triggered a surge in fuel loading costs at private depots in Lagos, with prices jumping from less than N850 to N900 per litre.
Industry analysts and oil marketers have expressed concerns that the halt in naira sales by the Dangote refinery could place additional strain on the foreign exchange market, as dealers would now need to source large amounts of US dollars to purchase petroleum products.
Multiple industry sources attribute the failed naira-for-crude talks to the extensive forward sales of crude by NNPCL.
Reports indicate that the national oil company has committed large portions of its yet-to-be-produced crude oil to secure loans from international financial institutions, limiting its ability to supply crude for local refining.
In a statement on Wednesday, the Dangote Group confirmed that the suspension of naira sales is temporary, citing the need to align sales proceeds with crude purchase obligations, which are currently denominated in US dollars.
“Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in US dollars.
“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 statement read.
The refinery dismissed reports suggesting it was stopping operations due to ticketing fraud, calling such claims “malicious falsehoods.”
It assured customers that operations remain intact and pledged to resume naira sales once it receives crude allocations from NNPCL.
An industry expert, speaking anonymously, highlighted the challenges facing the naira-for-crude arrangement, citing Nigeria’s limited crude production capacity and prior crude sales commitments as major obstacles.
“Nigeria generates over 90 per cent of its foreign exchange earnings from crude oil. We have struggled to consistently produce more than 1.6 million barrels per day, and a significant portion of this has already been sold in advance to manage cash flow problems caused by fuel subsidies. Given these constraints, sustaining a naira-for-crude deal seems unlikely,” the expert explained.
Another marketer pointed out that ongoing negotiations between NNPCL and Dangote refinery might have reached an impasse.
“In every negotiation, there has to be some level of compromise. If either party refuses to budge, then discussions may break down,” he added.
When asked about the situation, NNPCL spokesperson Olufemi Soneye neither confirmed nor denied the collapse of the naira-for-crude deal but reaffirmed the company’s commitment to supplying crude for local refining under mutually agreed terms.
“As I have repeatedly stated, NNPC remains committed to supplying crude for local refining based on mutually agreed terms and conditions. Additionally, the NUPRC has disclosed that all local refining companies collectively produce less than 50 per cent of our national consumption,” Soneye stated.
NNPCL previously announced fresh negotiations with the Dangote refinery regarding the renewal of the naira-for-crude deal, which was initially agreed upon in October 2024 and is set to expire this month. According to Soneye, NNPCL has supplied 48 million barrels of crude to the Dangote refinery since the agreement commenced.
As the Dangote refinery suspends naira transactions, oil marketers will now have to acquire dollars to purchase fuel, potentially leading to increased pressure on the naira.
Hammed Fashola, National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), warned that the development could reverse the recent stability of the naira and push fuel prices higher.
“The price of petrol depends on the exchange rate, crude price, and other landing cost factors. If marketers start chasing dollars to buy petrol, the naira will depreciate further,” Fashola explained.
He urged the Federal Government to reconsider its agreement with Dangote refinery to ensure stability in the sector.
“The masses have welcomed the recent drop in petrol prices, but just a few hours after Dangote’s announcement, private depot owners have started adjusting their prices upward. Yesterday, we closed with N825 to N826 per litre, but this afternoon, prices have risen to N835 to N836 per litre. The government must act to sustain the current stability,” he added.
