The Dangote Refinery announced Wednesday it has temporarily suspended the sale of petroleum products in naira, a decision that has already sent ripples through Nigeria's oil market with private depot prices jumping to N900 per liter from below N850.
In its statement, the $20 billion Lekki-based refinery explained the suspension was "necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in U.S. dollars." The company emphasized that "sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received," forcing them to "temporarily adjust our sales currency to align with our crude procurement currency."
The development comes as negotiations between Dangote and the Nigerian National Petroleum Company Limited (NNPC) for a renewal of the naira-for-crude deal appear to have stalled. Sources close to the matter attribute the breakdown to NNPC's inability to provide sufficient crude oil due to extensive forward sales of production to international financial institutions.
The naira-for-crude policy, which officially began on October 1, 2024, following approval by the Federal Executive Council, allowed local refineries to purchase crude oil in naira. This arrangement had enabled the Dangote refinery to repeatedly lower fuel prices in recent months, forcing NNPC to follow suit despite margin pressures.
NNPC spokesman Olufemi Soneye neither confirmed nor denied claims about halting the deal but stated the company "remains committed to supplying crude for local refining based on mutually agreed terms and conditions." He noted that NNPC has supplied 48 million barrels of crude to Dangote since October, while adding that local refineries collectively produce less than 50 percent of national consumption.
Industry stakeholders have expressed concern about the potential consequences. Hammed Fashola, National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), warned that marketers will now need to source dollars to purchase from Dangote, potentially placing "pressure on the naira" and causing it to "lose the stability it had gained lately."
Within hours of Dangote's announcement, private depot owners began raising their prices, with several facilities including Bovas, Aipec, Menj, and Integrated suspending petrol sales entirely. Chipet depot increased its price to N900 per liter from N835, while others like Rainoil, Wosbab, Pinnacle, MRS Tincan and Nipco also implemented price hikes.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) has characterized the development as "the latest ploy to frustrate the Dangote refinery and bring back the full importation of refined petroleum products." Eche Idoko, CORAN's National Publicity Secretary, warned that reverting to full imports would cause the naira to "struggle again" and lead to higher petrol prices.
Dangote refuted claims that the suspension was related to ticketing fraud, calling such reports "malicious falsehood" and assuring that their "systems are robust" with "no fraud issues." The company pledged to "promptly resume petroleum product sales in naira" as soon as they receive "an allocation of naira-denominated crude cargoes from NNPC."
Olatide Jeremiah, CEO of petroleumprice.ng, warned that "fuel pump prices might hit N1000/Liter in the coming days" if Dangote and NNPC cannot reach an agreement within 48 hours. He called on regulators to enforce Section 109 of the Petroleum Industry Act, which stipulates that local refineries should have "unhindered access to crude."
On Tuesday, Finance Minister Wale Edun met with Aliko Dangote, reportedly to discuss challenges with the naira-for-crude arrangement. Industry observers suggest that discontinuing the deal could be aimed at reducing the growing influence of the Dangote refinery, which some downstream players have accused of monopolistic tendencies.
