The Dangote Petroleum Refinery, along with some modular refineries in Nigeria, could spend approximately $8.56 billion to import about 122.4 million barrels of crude oil over the next six months, according.
This expenditure stems from the uncertainty surrounding the naira-for-crude policy between the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote refinery, compounded by concerns over the federal government’s Domestic Crude Supply Obligation.
This would mean that, on average, these refineries will spend about $1.43 billion each month on crude oil imports. The Dangote refinery, with a capacity of 650,000 barrels per day, and other domestic refineries, like the Edo refinery, which has a capacity of 30,000 barrels per day, will be reliant on imports to maintain operations.
Currently, the government’s failure to sustain the naira-for-crude arrangement has left these refineries stranded, with limited access to domestic crude. Modular refineries, particularly those without the financial capability of larger players like Dangote, are struggling to operate, with some not refining a single barrel of oil in the past six to eight months.
Eche Idoko, the National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria, highlighted that the Edo refinery is negotiating with U.S. crude suppliers for an offtake deal, but smaller refineries are increasingly struggling due to the lack of crude supply. He noted that the government’s failure to ensure a stable supply of crude has significantly undermined efforts to stabilize the domestic refining sector.
In the wake of the uncertainty surrounding the naira-for-crude deal, the Dangote refinery has temporarily halted the sale of petroleum products in naira. This decision comes as a result of mismatched sales proceeds from naira-denominated products and crude oil procurement obligations, which are in U.S. dollars. As a result, the refinery is now aligning its sales currency with the currency used for crude procurement to mitigate financial imbalances.
This shift has caused a ripple effect, with rising petrol prices at depots and retail stations. In Lagos, private depot owners have been increasing the cost of loading petrol, and retail stations in the Federal Capital Territory have raised pump prices by as much as 4.67%, reaching N940 per litre in some locations.
The breakdown of talks regarding the naira-for-crude deal adds to the growing concerns, with insiders revealing that the meeting between the Technical Sub-Committee on the Naira-for-Crude Policy and Dangote refinery was rescheduled due to incomplete submissions from the Nigerian Petroleum Upstream Regulatory Commission (NUPRC).
In addition, the increasing financial strain on domestic refineries and the potential for a price hike in refined products add to the challenges facing the Nigerian petroleum sector. The government’s handling of the domestic crude supply and refinery policies will likely become a significant political issue as the 2027 elections approach.
