NNPC Breaks Silence as Its Naira-for-Crude Deal with Dangote Refinery, Others Ends
- NNPC has reportedly decided to discontinue its naira-for-crude deal with local refineries as it moves to prioritise long-term contracts
- The development now means local refineries such as Dangote will have to source crude oil from international markets
- The national oil company has said it is still ready to make the crude oil available under a new agreement
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Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Nigerian National Petroleum Company (NNPC) Limited has halted the naira-for-crude oil swap deal with local refiners.
The changes also affect Dangote Petroluem Refinery, which has been key in bringing fuel prices below N900 per litre.
Source: Getty Images
The naira-for-crude initiative was initiated on October 1, 2024, and it allowed domestic refiners to purchase crude oil using the Nigerian currency rather than foreign currencies like the US dollar.
This policy aimed to bolster local refining capabilities, diminish reliance on imported petroleum products and ease pressure on Nigeria’s foreign exchange reserves.
NNPC stops naira-for-crude initiative
BusinessDay reports that the NNPC has communicated to local refiners, including Aliko Dangote’s refinery, that all available crude oil has been committed to forward contracts until 2030.
NNPC explained that its decision was because it could not fulfil domestic demand under the naira-for-crude arrangement.
The suspension has sparked concerns among industry observers, particularly regarding its potential impact on operational costs and fuel pricing.
Dangote Refinery, poised to be one of Africa’s largest, could be affected by the policy reversal.
Legit.ng earlier reported that Dangote Refinery announced that it had reached a peak production capacity of 33 million litres of petrol daily as it reached 550,000 barrels per day production.
The achievement proves that the facility has reached optimal production capacity. However, it is about 100,000 barrels per day short of reaching full capacity.
The company had said it hopes to achieve its installed production capacity of 650,000 bpd-capacity in June this year.
Other private refiners like Waltersmith Petroman and BUA Refinery are also bracing for increased procurement costs as they now face sourcing crude oil from international markets, priced in US dollars.
Economists believe that the discontinuation of the naira-for-crude deal may put more pressure on the naira as refineries will now have to source for dollars.
NNPC speaks on naira-for-crude reversal
Speaking on the development on Monday, March 10, in a statement signed by Olufemi Soneye, the Chief Corporate Communications Officer, NNPC provided clarification on the reported termination of the naira-crude agreement.
NNPC explained:
"NNPC Limited has noted recent reports circulating on social media regarding the alleged unilateral termination of the crude oil sales agreement in Naira between NNPC Ltd. and Dangote Refinery.
"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, NNPC Ltd. has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024. In aggregate, NNPC Ltd. 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."
Dangote refinery crashes petrol price
Earlier, Legit.ng reported that the Dangote petroleum refinery once again announced a reduction in the price of petrol at its facility.
The refinery reduced its price from N890 to N825 per litre for marketers and N860 per litre for retail stations.
Dangote has also partnered with four other marketers to ensure affordable petrol prices are available to motorists.
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Proofreading by Nkem Ikeke, copy editor at Legit.ng.
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Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.
Nkem Ikeke (Copy editor) Nkem Ikeke is currently a copy editor who also writes for the politics and current affairs desk on weekends. She holds a Bachelor of Arts in Mass Communication degree from the University of Nigeria, Nsukka (2010), and has over 10 years of work experience in the media industry (Reporter, News Agency of Nigeria). Email: n.ikeke@corp.legit.ng
