Fuel Price Hike Imminent as Dangote, NNPCL Naira-for-Crude Talks Stall
The Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in naira following a breakdown in negotiations with the Nigerian National Petroleum Company Limited (NNPCL) over the naira-for-crude agreement. As a result, the cost of loading petrol at private depots in Lagos surged to N900 per litre from less than N850 per litre. Industry analysts and marketers warn that this move could increase demand for US dollars, further pressuring the foreign exchange market.
Sources familiar with the situation attribute the failed negotiations to NNPCL’s extensive forward sales of crude oil, which have limited its ability to supply local refiners. The national oil company reportedly leveraged large volumes of its future crude production as collateral for international loans, reducing the crude available for domestic refining.
In a statement, the Dangote Group explained that the temporary halt in naira sales was necessary to align its sales proceeds with crude procurement obligations, which are currently denominated in US dollars. The company assured customers that sales in naira would resume once it receives an allocation of naira-denominated crude from NNPCL. Dangote also dismissed rumors that the decision was linked to fraud, stating that its internal systems remain secure.
An oil marketer, speaking anonymously, pointed out that Nigeria earns over 90 percent of its foreign exchange from crude sales and has struggled to sustain production beyond 1.6 million barrels per day. Given that a significant portion of the country’s crude is already committed to forward sales, the marketer questioned the feasibility of continuing the naira-for-crude deal.
NNPCL spokesperson Olufemi Soneye neither confirmed nor denied the collapse of the agreement but reiterated the company’s commitment to supplying crude to local refiners based on mutually agreed terms.
Hammed Fashola, National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), warned that shifting to dollar-denominated transactions could destabilize the naira. He noted that while current landing costs of petrol hover around N774.82 per litre, an increased demand for dollars could drive up prices. He urged the Federal Government to reconsider its position, emphasizing that maintaining stability in petroleum pricing is crucial. Depot owners have already responded to the development by increasing their prices, with rates rising from N825–N826 per litre to N835–N836 per litre within hours of Dangote’s announcement.
Billy Gillis-Harry, President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), cautioned that the suspension of naira sales would lead to price hikes unless the Federal Government intervenes. He stated that while there has been no official announcement ending the naira-for-crude deal, Dangote’s move signals trouble. Marketers raised concerns in a meeting with government officials, urging them to sustain the policy to prevent further disruptions.
Some industry insiders believe that halting naira-denominated crude supply could be a strategic move to curb Dangote’s growing dominance in the petroleum market, with downstream players fearing potential monopolistic control. On Tuesday, Minister of Finance Wale Edun met with Dangote Group President Aliko Dangote to discuss challenges surrounding the naira-for-crude arrangement.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) condemned the decision, warning that it threatens Nigeria’s energy security. National Publicity Secretary Eche Idoko argued that some industry stakeholders are more focused on Dangote’s benefits rather than the broader advantages the deal provides for the economy. He cautioned that a return to full-scale fuel importation would weaken the naira and drive up petrol prices.
IPMAN’s National PRO, Chinedu Ukadike, pointed out that Dangote has been under significant pressure to source dollars for crude purchases, which will inevitably lead to higher pump prices. With marketers now required to buy in dollars, he urged the government to intervene to prevent further financial strain on consumers.
Several private depots, including Bovas, Aipec, Menj, and Integrated, halted petrol sales following Dangote’s announcement. Meanwhile, depots that continued operations adjusted their prices upward: Chipet depot raised its price from N835 to N900 per litre, Rainoil increased from N830 to N835, and Wosbab and Pinnacle adjusted from N826 to N835.
Oil and gas expert Olatide Jeremiah, CEO of petroleumprice.ng, predicted that if no agreement is reached within 48 hours, fuel pump prices could soar to N1,000 per litre. He emphasized that private depots’ immediate reaction to Dangote’s decision underscores the refinery’s role as the key driver of Nigeria’s downstream sector. He urged NNPCL and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to enforce Section 109 of the Petroleum Industry Act, which guarantees local refiners access to crude oil.
With the uncertainty surrounding the naira-for-crude agreement, Nigerians may face another surge in fuel prices, adding further strain to the economy.