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The Nigerian National Petroleum Company (NNPC) Limited has officially halted the naira-for-crude deal with Dangote Petroleum Refinery and other local refineries, sources have confirmed to TheCable.

This decision could lead to a potential increase in petrol pump prices, as domestic refineries—including Dangote—will now have to source crude oil from international suppliers, incurring substantial costs in US dollars.

According to reports, the NNPC has forward-sold all its crude oil supplies, despite a rise in production levels compared to when the initiative began.

Origins and Suspension of the Naira-for-Crude Initiative

Nigeria introduced the naira-based crude oil sales policy on October 1, 2024, aiming to:

• Enhance domestic refining capacity
• Reduce reliance on costly petroleum imports
• Stabilize fuel prices by cutting foreign exchange dependency

However, multiple sources indicate that the initiative has now been suspended until 2030, marking a significant shift in Nigeria’s energy policy.

A senior industry official disclosed that NNPC has informed local refiners, including Dangote Petroleum Refinery, that crude allocations will no longer be available under the naira-based arrangement.

Despite recent government efforts to improve local refining, Nigeria has reportedly spent over $4.3 billion importing 6.38 billion litres of petrol (PMS) and diesel (AGO) in just five months.

Impact on the Fuel Market and Economy

With NNPC still importing petroleum products despite deregulation, critics argue that this decision could further strain foreign exchange (FX) markets, potentially weakening the naira and reversing recent economic gains.

"At a time when Nigerians are hoping for lower fuel prices, NNPC has unilaterally ended the naira-for-crude initiative," an industry source told TheCable.

While NNPC has yet to officially comment, officials from Dangote Refinery have also refrained from making a public statement. However, an insider disclosed that the company is reviewing its options before deciding on its next steps.

The Troubled History of the Crude-for-Naira Deal

The federal executive council (FEC) initially approved the allocation of 450,000 barrels per day (bpd) of crude for domestic refining, with the Dangote refinery serving as the pilot project.

Under this agreement:

• NNPC committed to supplying 385,000 bpd to Dangote’s refinery in Lekki
• However, deliveries reportedly fell short of the agreed volume

By November 2024, concerns about NNPC’s failure to meet supply commitments had already surfaced.

"We need 650,000 barrels per day, and NNPC agreed to supply at least 385,000 bpd, but they’re not even delivering that," said Edwin Devakumar, Vice President of Dangote Industries Limited (DIL).

Describing NNPC’s crude supply as "peanuts," Devakumar warned that continued supply shortages could undermine Nigeria’s refining goals.

What’s Next?

With local refineries now forced to rely on costly international crude suppliers, analysts warn that fuel prices could spike in the coming months, affecting consumers and businesses alike.

NNPC’s decision also raises concerns over the future of Nigeria’s energy policy, particularly in light of its commitment to boosting local refining capacity and reducing petroleum imports.

More updates are expected as the situation unfolds.

Source: TheCable