The Dangote Petroleum Refinery and several modular refineries in Nigeria may need to spend around $8.56 billion over the next six months to import crude oil in order to operate at full capacity. This translates to approximately $1.43 billion per month on crude imports.
The high cost of crude importation has been linked to ongoing uncertainty surrounding the naira-for-crude policy between the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote Refinery. Concerns have also been raised regarding the Federal Government’s Domestic Crude Supply Obligation, which was expected to provide local refiners with the necessary crude.
A scheduled meeting between the Technical Sub-Committee on the Naira-for-Crude Policy, Dangote Refinery, and government officials, which was set for Monday, did not take place as planned. A government official, who spoke anonymously, noted that the Nigerian Petroleum Upstream Regulatory Commission (NUPRC) had not yet completed its assigned tasks. The meeting has now been postponed and may take place before the upcoming Sallah holiday.
With a capacity of 650,000 barrels per day, the Dangote Refinery has continued to rely on imported crude due to the lack of local supply. Another refinery, the Edo Refinery, with a 30,000 barrels per day capacity, has also begun talks with a U.S.-based crude supplier to secure an offtake deal. Other modular refineries are also exploring alternative options to keep their operations running.
Reports indicate that Dangote and Edo refineries together require about 680,000 barrels per day, which amounts to roughly 20.4 million barrels per month and 122.4 million barrels in six months. With Brent crude averaging around $70 per barrel, the cost of importing this volume of crude would reach $8.56 billion within six months.
The National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria, Eche Idoko, noted that sourcing crude oil from alternative suppliers has become the only option for refiners. He also pointed out that many smaller modular refineries have been unable to operate due to financial constraints and the government’s failure to ensure product offtake under the domestic crude supply arrangement.
“Edo refinery, which is trying to expand its plant to 30,000 barrels per day, is in talks with crude suppliers from the United States. Others, apart from Walter Smith refinery and Aradel, who are momentarily relying on crude produced from their fields, are more or less stranded. Other modular refineries have not been able to refine a litre in the last six to eight months,” Idoko stated.
Several modular refineries in Nigeria, including Walter Smith, Aradel, Omsa Pillar Astex, Edo Refinery, and Duport Modular Refinery, are struggling due to the lack of local crude supply. Clairgold and Azikel refineries are also still under construction.
Idoko noted that the government’s failure to allocate enough crude to local refiners has hurt efforts to stabilize the sector. He added that the lack of crude supply could have political implications ahead of the 2027 elections, as it affects investor confidence in local refining.
The naira-for-crude deal initially showed promise during its pilot phase with the Dangote Refinery. However, talks on extending the deal reportedly stalled due to issues with crude availability. Sources noted that the NNPCL had already allocated a significant volume of crude to foreign creditors to settle loan obligations, making it difficult to sustain the agreement.
An analysis of reports from the Nigeria Extractive Industries Transparency Initiative and the NNPC’s 2023 financial statements revealed that 8.17 million barrels of crude had been pledged for various loan repayments each month, with another $9.5 billion in forward oil sales agreements.
Following the breakdown of talks, Dangote Refinery temporarily suspended the sale of petroleum products in naira, citing a mismatch between its sales revenue and crude procurement costs, which are denominated in U.S. dollars. The company explained:
“Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in U.S. dollars.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency.”
Within three days of this announcement, Dangote Refinery imported 654,766 metric tonnes of crude oil.
The situation has sparked concerns among industry stakeholders and consumers, as it may lead to a rise in petrol prices. Private depot owners in Lagos have increased loading costs for petroleum products, while retail stations in Abuja raised pump prices by as much as ₦42 per litre, reaching ₦940 at some stations.
A survey of petrol stations revealed that Conoil along Airport Road adjusted its price to ₦940 per litre, AYM Shafa and Matrix increased to ₦920, while Salbas raised its price to ₦930 per litre. NNPCL and MRS stations, selling at ₦880 per litre, witnessed long queues as consumers rushed to buy cheaper fuel.
At loading depots, Rainoil Depot increased prices from ₦860 to ₦870 per litre, while WOSBAB, Pinnacle, Aiteo, and Nipco also adjusted their prices to ₦870 per litre.
