Fuel prices may rise as NNPC halts Naira-for-Crude deal with Dangote Refinery, others
In a significant policy shift, the Nigerian National Petroleum Company (NNPC) Limited has terminated its naira-for-crude arrangement with Dangote Petroleum Refinery and other local refineries. This decision is anticipated to impact petrol prices and the nation’s foreign exchange dynamics.
Launched on October 1, 2024, the naira-for-crude initiative aimed to bolster domestic refining by supplying crude oil to local refineries in exchange for payment in naira.
This strategy sought to reduce reliance on imported petroleum products, conserve foreign reserves, and stabilize pump prices. The Dangote Refinery, with a capacity of 650,000 barrels per day, was a primary beneficiary of this scheme.
Despite its objectives, the initiative faced hurdles. The NNPC struggled to meet its crude supply commitments, delivering quantities described as “peanuts” by Edwin Devakumar, Vice President of Dangote Industries Limited.
Consequently, the NNPC has forward-sold all its crude supplies until 2030, leading to the suspension of the naira-for-crude arrangement.
With the termination of the naira-based crude supply, local refineries, including Dangote, must procure feedstock from international markets, incurring costs in dollars. This shift could result in higher petrol prices domestically. Market analysts warn of potential volatility in the foreign exchange market, which may erode recent gains.
The Dangote Refinery has yet to comment on the NNPC’s decision and all inquiries by Neusroom has not been responded to as of press time. However, reports suggest that the refinery is assessing its options.
As local refineries adapt to sourcing crude internationally, stakeholders are closely monitoring the impact on petrol prices and the broader economy.
