Barring any last-minute intervention by the federal government, fuel price may rise as the Dangote Petroleum Refinery on Wednesday announced suspension of sales of products in Naira.
Although the suspension is temporary, according to the management of the 650,000-barrel per day refinery, it was aimed at matching its “sales proceeds with crude oil purchase” obligations.
The agreement
President Bola Tinubu had directed the sale of crude oil to Dangote in Naira as part of measures to reduce the price of petrol.
In October 2024, the Federal Executive Council (FEC) approved that 450,000 barrels intended for domestic consumption be offered in Naira to Nigerian refineries, with the Dangote Refinery acting as a pilot project.
The government had also raised a committee chaired by the Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, to implement the crude oil sales in Naira.
“From October 1, the Nigerian National Petroleum Company Limited (NNPCL) will commence the supply of about 385kbpd (385,000 barrels per day) of crude oil to the Dangote refinery to be paid for in Naira,” the committee had declared.
But Daily Trust gathered that the deal which was signed in October 2024 and was expected to elapse at the end of March 2024, in the first instance, collapsed even before the date.
Before now, there had been low supply of crude to Dangote Refinery despite the arrangement, it was gathered.
Under the arrangement, the NNPCL was expected to supply 385,000 barrels of crude oil to the 650,000 bpd Dangote Refinery located in Ibeju-Lekki Lagos.
But findings showed that there had been a consistent low supply of allocations to Dangote Refinery, forcing it to resort to importation.
A source said, “In the first place, the NNPCL has not been faithful with the deal and the deal has been largely distorted and the collapse of this deal now leaves the local refineries with no other option than to be sourcing for dollars to buy crude.”
Daily Trust earlier reported that there had been a decline in the volume of crude allocated to the Naira-for-crude scheme.
A document reviewed late January indicated that for February 2025, the scheme was allocated only four cargoes, and for March, just two cargoes totalling 950,000 barrels (1.9 million barrels in total for the month). This represents an allocation of 61,290 barrels per day – far below the 385,000 bpd target under the scheme.
NNPCL’s earlier comments on Naira for Crude
It would be recalled that about two weeks ago when story broke that the deal was on the verge of collapse, the NNPCL through its chief spokesperson, Olufemi Shoneye said, “to clarify, the contract for the sale of crude oil in Naira was structured as a six-month agreement, subject to availability, and expires at the end of March 2025.
“Discussions are currently ongoing towards emplacing a new contract. Under this arrangement, NNPCL has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024. In aggregate, NNPCL has made over 84 million barrels of crude oil available to the Refinery since its commencement of operations in 2023.
“NNPC Limited remains committed to supplying crude oil for local refining based on mutually agreed terms and conditions…”
Daily Trust could not confirm what led to the breakdown of that negotiation which led to the latest statement by Dangote Refinery.
“In all negotiations, there must be give and take and compromise. Once either party insists on its own position irrespective of the circumstances, then things might break down,” one of the marketers told our correspondent yesterday.
Shoneye could not be reached yesterday to get NNPCL’s reaction on the latest development.
His phone could not connect around 10.30pm and he was yet to respond to a text message sent to him before going to the press.
Dangote’s suspension of petrol sale
Yesterday, Dangote refinery confirmed suspending the sale of its products comprising PMS, diesel and Jet fuel in Naira.
According to it, “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.”
In a message to its customers, Dangote Refinery said, “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.”
In the same vein, Dangote dismissed a report suggesting that it had stopped loading due to an incident of ticketing fraud.
“This is a malicious falsehood. Our systems are robust and we have had no fraud issues.
“We remain committed to serving the Nigerian market efficiently and sustainably. As soon as we receive an allocation of Naira-denominated crude cargoes from NNPCL, we will promptly resume petroleum product sales in Naira,” the notice read.
How suspension of Naira for crude will impact fuel price
The implication of this announcement from Dangote, according to experts, will be an increase in PMS price in days to come unless the government intervenes.
This means that fuel price would now be determined by market forces and priced in dollars.
With the steep rise in foreign exchange, analysts and marketers said Nigerians might soon return to buying the product at over N1,000 per litre.
Following the Naira-for-crude arrangement, the price has remained under N1,000 with it dropping to below N900 in some instances.
But with the deregulation of the petroleum downstream sector, a departure from the subsidy regime of the past, marketers said Nigerians should not expect a stable price of PMS and other petroleum products.
Those who spoke to Daily Trust said the Naira-for-crude arrangement ensured Nigerians got fuel at relatively affordable prices.
“If everything will be dollarised, it means we should not expect any stable price because as the dollar is moving up, the prices will move with it,” Chief Executive Officer of CITA Energy, Dr Thomas Ogungbangbe, said in a chat with our correspondent.
He said, “What he (Dangote) is trying to do is that he wants to buy crude in Naira for him to sell in Naira, but since he is now going to buy crude in dollars from the federal government or from anywhere in dollar, it is also better for him to sell in dollars otherwise he would run into bankruptcy.”
He stated that the development would put a lot of pressure on the dollar and it would be more expensive in days to come.
Explaining that the rise in foreign exchange might lead to rise in the prices of PMS, he stated that it is the people on the street that would suffer for it.
“You find out that about 30 to 40 per cent of what we use our dollar on is petroleum products which we thought that Dangote had solved but it appears our problem has just started,” he added.
He stated that another implication of Dangote not selling in Naira is that it would encourage importation.
On his part, the Executive Secretary of Major Energies Marketers Association (MEMAN), Mr Clem Isong, expressed optimism that the stakeholders would collaborate to resolve the issue.
“We will resolve it. The man (Dangote) loves Nigeria. The people in the Ministry of Petroleum love Nigeria, we all love Nigeria, everybody would resolve it,” he said.
Experts seek govt’s intervention to stop petrol price hike
Oil and gas industry analyst, Dr Marcel Okeke, in a chat with our correspondent, said it was the Naira-for-crude arrangement that had brought relief to Nigerians.
He urged the president to intervene immediately.
“So, once they switch back to everything in dollars, we will go back to worse times. Yes, that is it. Because everything they are doing is cost driven.
“Now, that they are talking about their cost in dollars and you know what dollars means for Nigeria. We don’t have dollars and that’s at the heart of our problem, that’s at the heart of our economic challenge.
“So once Dangote goes back to doing things in dollars, it’s dangerous. It’s dangerous for Nigeria, I’m telling you.
“So my recommendation is that quickly, let them extend the Naira-for-crude arrangement. They have to. They have to extend it. In fact, even going forward, that should be the order to encourage local refining. If this economy will be pulled out of the woods, that arrangement is very critical,” he said.
He warned that the price of PMS might soon hit the roof which would also have implications on inflation.
