The Dangote Petroleum Refinery has temporarily stopped selling petroleum products in naira. This decision follows unsuccessful negotiations between the refinery and the Nigerian National Petroleum Company Limited (NNPCL) regarding a naira-for-crude agreement.
The halt in sales has already impacted the market, with fuel loading costs at private depots in Lagos increasing from less than N850 per liter to N900 per liter. Industry experts and marketers warn that this move could put more pressure on the foreign exchange market as buyers will now need US dollars to purchase fuel.
Sources familiar with the stalled negotiations noted that the NNPCL has already committed large volumes of future crude oil production to repay loans obtained from international financial institutions. As a result, it has been unable to allocate enough crude for local refining under the naira-for-crude deal.
In a statement released on Wednesday, the Dangote Group explained that the suspension of naira sales is temporary.
The statement read: “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 US 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.”
The company also denied reports that the suspension was due to fraudulent activities, stating: “This is a malicious falsehood. Our systems are robust, and we have had no fraud issues.”
An oil marketer who spoke anonymously noted that Nigeria earns over 90% of its foreign exchange from crude oil sales. However, much of its crude production has already been sold in advance, limiting the availability of supply for domestic refineries.
The marketer said, “We have not been able to produce much more than 1.6 million barrels a day on a consistent basis. Much of that production has already been sold in advance to ease cash flow problems that came about because NNPCL was absorbing the cost of subsidizing gasoline prices.”
NNPCL’s spokesperson, Olufemi Soneye, neither confirmed nor denied the reports that the company was ending the naira-for-crude arrangement with Dangote. However, he maintained that the company remains committed to supplying crude for local refining under agreed terms.
“As I have repeatedly stated, NNPC remains committed to supplying crude for local refining based on mutually agreed terms and conditions,” Soneye stated.
Industry players have expressed concerns that suspending the naira-for-crude deal could lead to an increase in fuel prices. The National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Hammed Fashola, noted that if marketers begin sourcing dollars to buy fuel, the naira could weaken further, leading to higher costs.
He explained, “The price of petrol will depend on the exchange rate, the crude price, and other factors that determine the landing cost. If marketers run after the dollar to buy petrol from Dangote refinery, the naira will lose value again.”
Fashola urged the government to reconsider the agreement to maintain stable fuel prices, warning that private depot owners have already started increasing prices in response to Dangote’s announcement.
