New Dollar Exchange Rate Expected As Dangote Halts Petrol Sales in Naira

• Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in naira,
• The management of the refinery is not happy that the agreement with the NNPC limited is unfavourable
• The decision is expected to fuel increased demand for the US dollar, potentially weakening the naira further

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.

Dangote Petroleum Refinery has announced a temporary halt in the sale of petroleum products in naira.

The refinery said its decision is due to an imbalance between its sales proceeds and crude oil purchase obligations denominated in dollars.

BusinessDay reports that the refinery, capable of refining 650,000 barrels per day, has faced challenges accessing crude oil from local producers, primarily due to the Nigerian National Petroleum Company (NNPC) Limited failing to fulfil its part of the crude oil swap agreement.

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Dangote suspends local sale of petrol

In a statement titled ‘temporary suspension of sales of petroleum products in naira,’ Dangote Petroleum Refinery clarified that the decision was necessary to align its sales currency with the crude procurement currency.

The management emphasised that the temporary adjustment is aimed at addressing the disparity where sales in naira have exceeded the value of naira-denominated crude received.

Part of the statement reads:

"We wish to inform you that, 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 U.S. 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."

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Responding to rumours circulating online regarding ticketing fraud, the refinery categorically dismissed these claims as ‘malicious falsehood,’ reaffirming the integrity of its operational systems.

Naira to be impacted by Dangote decision

Market analysts anticipate the announcement to trigger a rush for dollars among petroleum marketers and stakeholders, anticipating increased transactions in US dollars for purchasing products.

They believe that the shift towards sourcing crude in dollars could potentially is expected to fuel a surge in demand for the US dollar in Nigeria’s foreign exchange market.

Recent data from the Central Bank of Nigeria (CBN) revealed a slight dip in the naira by 30 basis points, settling at N1,532.94/$ in the Nigerian Foreign Exchange Market (NFEM).

This is now expected to change in the days ahead unless the NNPC and Dangote can reach an agreement.

Abubakar Maigandi, president of the Independent Petroleum Marketers Association of Nigeria (IPMAN) has expressed discontent with the new directive from Dangote Refinery, urging the government and NNPC to continue crude sales in naira to sustain the downward trend in petrol prices and ensure availability across the country.

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“We call on the government and the NNPC to continue the sales of crude to the Dangote Refinery in Naira. Since the Naira -for-Crude sales commenced, we have seen a continuous reduction in the price of petrol as well as its availability across the country."

NNPC to now sell only Dangote petrol

Earlier, Legit.ng reported that NNPC Limited has confirmed that it has ended the importation of petrol and now patronises Dangote Petroleum Refinery.

Mele Kyari believes that the shift away from imports will help reduce the pressure the naira faces on the forex exchange markets.

Aliko Dangote has always stressed that his $20 billion refinery can meet the petrol needs of Nigerians and that there is no need to import.

Source: Legit.ng