JUST-IN: NNPC Suspends Naira-for-Crude Deal With Domestic Refiners Including Dangote.
In a surprising turn of events, the Nigerian National Petroleum Company (NNPC) Limited has announced the suspension of its naira-for-crude oil swap deal with domestic refiners, including the prominent Dangote Refinery and other private operators. The decision, reported by Businessday, marks a significant shift in Nigeria’s oil industry policy, raising questions about its implications for local refining and fuel prices.
The naira-for-crude initiative, launched on 1 October 2024, was hailed as a groundbreaking move to bolster Nigeria’s domestic refining capacity. Under the scheme, local refineries were permitted to purchase crude oil in naira rather than US dollars, a policy designed to ease pressure on the country’s foreign exchange reserves and support the local currency. The arrangement also aimed to reduce Nigeria’s reliance on imported petroleum products, a long-standing economic challenge for the oil-rich nation.
However, the NNPC’s decision to halt the programme has caught industry stakeholders off guard. Sources suggest that the suspension stems from the state oil company’s existing commitments to forward contracts, which have tied up its crude oil production for export. This leaves little to no supply available for domestic refineries, forcing operators like Dangote Refinery to seek crude from international markets—a move that could drive up costs and reverse some of the initiative’s intended benefits.
The Dangote Refinery, a £15 billion mega-project spearheaded by Africa’s richest man, Aliko Dangote, was a key beneficiary of the naira-for-crude deal. With a capacity of 650,000 barrels per day, the facility was expected to transform Nigeria into a net exporter of refined petroleum products. However, the refinery has faced challenges in securing adequate crude supplies from the NNPC since the programme’s inception. Edwin Devakumar, Vice President of Dangote Industries, recently described the NNPC’s deliveries as “peanuts,” highlighting the shortfall against the promised 385,000 barrels per day.
Industry experts have offered mixed reactions to the suspension. While some fear it could lead to higher petrol prices as refineries turn to dollar-denominated international crude, others argue that the impact may be limited. “The naira-for-crude deal never fully delivered on its promise,” said a Lagos-based oil analyst. “The NNPC’s inconsistent supply meant it had little effect on pump prices anyway.”
The move is a blow to Nigeria’s ambition of achieving self-sufficiency in petroleum products. Despite the operational start of Dangote Refinery and efforts to revive state-owned facilities, the country has continued to spend billions importing fuel. Reports indicate that Nigeria splashed out over £3.4 billion on 6.38 billion litres of petrol and diesel in just five months last year.
Neither the NNPC nor Dangote Refinery has issued an official statement on the suspension as of yet. However, insiders suggest that the halt could extend until 2030, aligning with the NNPC’s long-term crude export commitments. For now, Nigerians are left wondering whether this decision will unravel recent progress in the domestic refining sector or simply force a rethink of the country’s energy strategy.
As the story develops, all eyes will be on the NNPC and Dangote Refinery to see how they navigate this unexpected twist in Nigeria’s quest for energy independence.
Source: Businessday
