Dangote Refinery Halts Naira Sales Amid Failed Naira-for-Crude Talks with NNPCL

Oil Marketers Warn of Price Hikes and Forex Pressure

The Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in naira following the apparent collapse of the naira-for-crude agreement with the Nigerian National Petroleum Company Limited (NNPCL). This development has sparked concerns over rising fuel prices and increased pressure on Nigeria’s foreign exchange market.

The $20 billion refinery, located in Lekki, Lagos, announced the suspension on Wednesday, citing a mismatch between its crude oil purchase obligations—denominated in U.S. dollars—and its sales revenue in naira. The company clarified that this move was temporary and would be reversed once it received an allocation of naira-priced crude from NNPCL.

“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,” Dangote Refinery stated.

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NNPCL’s Forward Crude Sales Blamed for Deal’s Collapse

Industry insiders revealed that NNPCL’s extensive forward sales of crude oil played a significant role in the failure of the naira-for-crude talks. Reports suggest that NNPCL had already committed large portions of unproduced crude oil to secure loans from international financial institutions, leaving insufficient crude available for local refining.

NNPCL spokesperson Olufemi Soneye declined to confirm whether the agreement had been completely scrapped but reiterated that NNPCL remains committed to supplying crude for local refining under mutually agreed terms.

“NNPC remains committed to supplying crude for local refining based on mutually agreed terms and conditions,” Soneye stated.

Sources close to the negotiations revealed that discussions between Dangote Refinery and the Technical Sub-Committee on the naira-for-crude deal had collapsed due to a lack of adequate crude supply.

Fuel Prices Surge as Oil Marketers React

The immediate impact of the Dangote Refinery’s decision was a sharp increase in petrol loading costs at private depots in Lagos. The price surged to ₦900 per litre, up from less than ₦850 per litre just before the announcement.

Oil marketers have expressed concerns that the suspension will further destabilize the fuel supply chain, forcing dealers to source large amounts of foreign exchange to purchase petroleum products.

An anonymous industry expert explained the gravity of the situation:

“Nigeria generates over 90 percent of its foreign exchange earnings from crude oil sales. However, much of that production has been sold in advance to ease NNPCL’s cash flow problems. How can the naira-for-crude deal be sustained under such conditions?”

Economic Concerns and Possible Naira Devaluation

The halt in naira sales has raised fears of increased pressure on the exchange rate, potentially leading to further devaluation of the naira. The National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Hammed Fashola, warned that the price of petrol would now depend on fluctuations in the exchange rate.

“If marketers scramble for dollars to buy petrol from Dangote Refinery, the naira will lose value again. Let’s wait and see how the market reacts,” Fashola said.

He urged the Federal Government to reconsider its stance and ensure continued crude supply to Dangote and other local refiners to maintain fuel price stability.

“The masses are happy with the recent drop in petrol prices. But just hours after Dangote’s announcement, private depot owners started adjusting prices upward. Yesterday, prices were around ₦825 to ₦826 per litre. Today, they are already increasing to ₦835 to ₦836 per litre,” Fashola added.

Petroleum Associations Warn of Market Instability

The National President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, also cautioned that the suspension could lead to price hikes. However, he noted that the Federal Government had yet to make an official decision on whether to abandon the naira-for-crude deal altogether.

“There was no formal decision to halt the deal. Dangote is a businessman, and every businessman is entitled to a projective opinion,” Gillis-Harry stated.

Some industry sources speculated that ending the deal might be an attempt to reduce the dominance of Dangote Refinery, which has significantly influenced fuel pricing in Nigeria.

Last week, Finance Minister Wale Edun met with Aliko Dangote to discuss the challenges surrounding the agreement, signaling potential government intervention.

Industry Players Call for Policy Review

Domestic refiners have criticized the suspension of the naira-for-crude deal, arguing that it undermines Nigeria’s push for local refining and may encourage a return to full petroleum product importation.

Eche Idoko, the National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria (CORAN), expressed frustration over the situation.

“The government sidelined CORAN during negotiations, so we are unaware of the exact terms. But if this deal collapses, it means Nigeria will revert to full importation, putting more pressure on the naira and driving up fuel prices,” Idoko warned.

IPMAN National Public Relations Officer, Chinedu Ukadike, echoed these concerns, stating that the cost of sourcing foreign exchange for petrol purchases would inevitably push pump prices higher.

“Dangote has been under immense pressure to source dollars for crude oil purchases. Now, marketers will have to buy in dollars. Whatever happens in the oil and gas sector ultimately impacts the consumer. Get your dollars ready—petrol prices will rise,” Ukadike cautioned.

Depot Owners React as Prices Climb

Following Dangote’s announcement, private depot owners such as Bovas, Aipec, Menj, and Integrated temporarily halted petrol sales, further fueling market uncertainty.

Olatide Jeremiah, CEO of petroleumprice.ng, warned that loading costs could hit ₦1,000 per litre if the government and Dangote Refinery fail to reach a resolution.

“This sharp price increase and the suspension of sales reaffirm Dangote as the market leader in Nigeria’s downstream sector. The government must act quickly to ensure local refiners have access to crude oil as required by Section 109 of the Petroleum Industry Act,” Jeremiah stated.

Conclusion

As discussions between the Federal Government and Dangote Refinery continue, Nigerians are bracing for the economic impact of the refinery’s shift to dollar transactions. The situation remains fluid, with stakeholders closely monitoring whether the naira-for-crude deal will be reinstated or abandoned altogether.