The Nigerian National Petroleum Company (NNPC) Limited has discontinued its naira-for-crude arrangement with Dangote Petroleum Refinery and other local refineries, sparking concerns about a potential rise in fuel prices.
As a result, domestic refineries will now have to source crude oil from international suppliers and pay in dollars rather than naira. This shift is expected to increase production costs, which could ultimately lead to higher fuel prices at the pump.
According to sources, NNPC has already informed refineries that it has forward-sold all its crude oil, despite the country’s increased crude production since the deal was introduced.
The naira-for-crude initiative was launched on October 1, 2024, to encourage local refining, reduce Nigeria’s dependence on imported fuel, and lower petrol prices. However, multiple reports indicate that the program is now suspended until at least 2030.
An industry insider confirmed the development, stating, “NNPC has informed Dangote Petroleum Refinery and other refiners that it can no longer supply them with crude oil, as all its crude has been forward-sold until 2030.”
Critics have condemned the decision, with one source remarking, “Just when Nigerians were expecting further price reductions, NNPC has unilaterally decided to end the naira-for-crude initiative.”
The Dangote refinery has not yet issued an official response, but a company representative stated that they are carefully assessing their options before taking further action.
In October 2024, the Federal Executive Council (FEC) approved the allocation of 450,000 barrels of crude oil for domestic refining, with payments to be made in naira. The Dangote refinery was chosen as the pilot project and was expected to receive 385,000 barrels per day. However, NNPC has been criticized for failing to meet its supply obligations.
This recent decision is likely to create instability in the foreign exchange market, potentially reversing the naira’s recent gains.
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