The Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in naira, citing a mismatch between its sales proceeds and crude oil purchase obligations, which are currently denominated in US dollars. This move comes after a breakdown in the naira-for-crude talks between the $20 billion Lekki-based refinery and the Nigerian National Petroleum Company Limited (NNPCL).
Following the announcement, petrol prices at private depots in Lagos surged, with the cost of loading petrol jumping to N900 per litre from around N850. Industry experts warn that this halt could increase pressure on the foreign exchange market, as oil marketers will now need to source US dollars to procure the refined products from the Dangote refinery.
In a statement issued on Wednesday, the Dangote Group clarified that the suspension is temporary, explaining that the refinery had already sold more petroleum products in naira than the amount of naira-denominated crude it had received. “This decision is necessary to avoid a mismatch between our sales proceeds and crude oil purchase obligations, which are denominated in US dollars,” the statement read. It also denied reports of ticketing fraud, describing such claims as false.
Experts in the industry suggest that the halted naira-for-crude deal may have collapsed due to the NNPCL’s forward sales of crude oil to international financial institutions, which have tied up large volumes of yet-to-be-produced crude. This has limited the NNPCL’s ability to supply the domestic market adequately. A source familiar with the issue noted that much of Nigeria’s crude production has already been sold in advance to cover the cost of subsidizing gasoline prices, making it difficult to sustain the naira-for-crude agreement.
A major marketer, speaking confidentially, explained that Nigeria generates over 90% of its foreign exchange from crude oil exports, but the country has not been able to consistently produce more than 1.6 million barrels per day. The marketer expressed concerns that the deal’s collapse could place further strain on the naira.
The NNPCL, through its spokesman Olufemi Soneye, neither confirmed nor denied the cessation of the naira-for-crude deal, but reiterated the company’s commitment to supplying crude for local refining based on mutually agreed terms. Soneye added that all local refiners combined produce less than 50% of Nigeria’s national consumption.
As Dangote refinery suspends the sale of products in naira, petrol marketers will now be required to source foreign currency, which could lead to price hikes across the country. The National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Hammed Fashola, expressed concerns that this could erode the recent stability of the naira and escalate petrol prices.
Fashola called on the Federal Government to revisit the naira-for-crude deal to ensure continued stability in petroleum product prices. “The masses today are happy with the drop in petrol prices, but just a few hours ago, private depot owners started increasing their prices in response to Dangote’s decision,” he said.
The National President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, warned that the halt in sales could lead to an increase in fuel prices. However, he clarified that no official decision had yet been made by the Federal Government regarding the cancellation of the naira-for-crude deal.
Oil industry insiders suggest that the suspension of the naira-for-crude deal may be an attempt to curtail the dominance of Dangote’s refinery, which some believe could be planning to monopolize the market. Domestic refiners also view the suspension as a setback for energy security efforts, potentially forcing Nigeria to return to full-scale fuel importation.
As depot owners have already increased petrol prices, experts fear that loading costs could soon reach N1,000 per litre if a resolution is not reached.
The growing uncertainty surrounding the deal and its potential impacts on the oil sector and the broader economy continues to unfold, leaving both industry players and consumers on edge.
