Uncertainty Looms Over the Future of Nigeria’s Naira-for-Crude Policy

NNPCL and Dangote Refinery Yet to Reach Agreement on Policy Renewal

 Naira-for-Crude policy remains uncertain as key stakeholders, including the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote Petroleum Refinery, prepare to reconvene for further negotiations.

The six-month agreement, which was established between NNPCL and the Dangote Refinery in October 2024, officially expired on March 31, 2025, without any official renewal. As a result, the sale of refined petroleum products in Naira has been suspended, raising concerns over fuel prices and economic stability.

Despite the policy suspension, the Dangote Refinery has continued operations, processing approximately 400,000 barrels per day (bpd) of crude oil in 2025 so far. However, a notable shift has occurred, with 35% of its crude supply now coming from international imports—primarily sourced from Brazil and Equatorial Guinea. This shift underscores Nigeria’s domestic supply challenges and the refinery’s increasing dependence on foreign markets.

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Evaluating the Economic Impact of the Naira-for-Crude Policy

A source familiar with the policy discussions revealed to The Punch that although the Naira-for-Crude initiative is under review, its impact on fuel prices and the foreign exchange rate is undeniable.

“The initiative is going to continue because it has had a significant impact not only on fuel prices but also on other economic indicators, including the foreign exchange rate,” the source stated.

Introduced in October 2024, the Naira-for-Crude policy aimed to reduce Nigeria’s dependence on imported fuel and stabilize domestic fuel prices by ensuring a steady supply of crude oil to local refineries.

Under the arrangement, NNPC supplied 48 million barrels of crude oil, bringing the total supply since 2023 to 84 million barrels. However, the policy’s expiration has raised critical questions about whether the government will extend or modify the deal to address its shortcomings.

A senior government official, speaking under anonymity, stated that the committee responsible for overseeing the policy was awaiting further recommendations from the Nigeria Upstream Petroleum Regulatory Commission before determining the next steps.

“The decision on the policy’s continuation will depend on the commission’s findings,” the official emphasized.

NNPC’s Supply Shortfalls and Dangote’s International Pivot

Despite the initial promise of the Naira-for-Crude policy, the Dangote Refinery has faced significant challenges due to NNPC’s failure to meet its crude supply commitments.

According to data from the Commodity Analysis System (CAS), NNPC only supplied about a third of the promised 300,000 bpd, creating an operational shortfall that forced Dangote Refinery to seek alternative sources.

In response, Dangote Refinery has increasingly turned to global crude suppliers. On March 26, 2025, Brazil’s Petrobras delivered a cargo of Tupi crude, marking a strategic shift in the refinery’s sourcing.

A Dangote executive, speaking to S&P Global, expressed doubts over the future of the Naira-for-Crude policy, stating:

“We are not even certain if it will be renewed or if it will proceed at all.”

The executive further highlighted the financial challenges associated with the Naira-based pricing structure, explaining that the exchange rate fluctuations made the policy commercially unsustainable.

“It’s not commercially advantageous for us,” the executive noted. “The risk of price fluctuations when buying and selling oil products in Naira is too high.”

Dangote Refinery Expands International Partnerships

With Nigeria’s domestic crude supply proving unreliable, Dangote Refinery is broadening its global supplier base. Brazil’s Petrobras and Equatorial Guinea have become key suppliers, offering more stability and supply certainty.

This expansion marks a significant departure from Nigeria’s previous goal of self-sufficiency, highlighting the lingering structural issues within the country’s oil production and supply chain.

The strained relationship between Dangote Refinery and NNPC has only intensified amid these developments. Industry analysts suggest that unless NNPC can improve its supply reliability, Dangote may continue prioritizing international crude sources, further diminishing Nigeria’s control over its downstream oil sector.

Ongoing Negotiations and the April Supply Outlook

As discussions continue, there is speculation over whether NNPC will resume crude deliveries to Dangote Refinery under revised terms.

Sources indicate that NNPC has allocated seven crude oil cargoes for April, estimated to deliver around 245,000 bpd to Dangote Refinery. However, payment terms remain unresolved, adding another layer of uncertainty to the policy’s renewal prospects.

Given these unresolved issues, it remains unclear whether the Naira-for-Crude initiative will be revived in its original form, significantly modified, or scrapped altogether.

What Lies Ahead for Nigeria’s Energy Sector?

With the future of the Naira-for-Crude policy hanging in the balance, stakeholders are closely monitoring developments.

Some experts argue that a revamped policy with improved supply guarantees and revised pricing mechanisms could still benefit Nigeria’s oil industry. Others believe that Dangote Refinery’s move towards global suppliers signals a fundamental shift away from domestic reliance.

Key considerations moving forward include:

• Ensuring a stable supply of crude oil to local refineries without compromising economic stability.
• Addressing NNPC’s delivery shortfalls to maintain investor confidence.
• Reevaluating the pricing structure to ensure both government and private refineries can operate sustainably.
• Minimizing foreign exchange volatility by striking a balance between local and international oil trade.

For now, the Naira-for-Crude policy remains in limbo, with its fate likely to be determined in the coming weeks as both the government and private sector weigh their options.