The Dangote Petroleum Refinery has announced a temporary suspension of petroleum product sales in Nigerian naira, a move that could lead to increased fuel prices nationwide. This decision stems from challenges in the naira-for-crude agreement with the Nigerian National Petroleum Company Limited (NNPCL), highlighting broader economic implications.
The refinery’s management cited a significant mismatch between revenues earned in naira and crude oil procurement costs denominated in U.S. dollars as the primary reason for halting naira-based sales. This discrepancy has strained the refinery’s financial operations, prompting the need for this temporary measure.
Industry experts warn that this suspension may result in higher fuel prices. Oil marketers have expressed concerns that sourcing foreign exchange at prevailing market rates to purchase petroleum products could escalate costs, subsequently affecting pump prices.
The naira-for-crude arrangement, initiated in October 2024, allowed the refinery to acquire crude oil from NNPCL in exchange for naira payments. However, delays in renewing this agreement have disrupted the refinery’s operations, contributing to the current suspension of naira-based sales.
The suspension’s impact extends beyond fuel prices. Analysts anticipate increased demand for U.S. dollars as importers seek foreign currency to purchase petroleum products, potentially exerting additional pressure on the naira’s value.
The Nigerian government and NNPCL are reportedly in discussions with the Dangote Refinery to address these challenges. Timely resolution is crucial to prevent prolonged fuel shortages and stabilize the domestic fuel market.
The Dangote Refinery’s suspension of naira-based petroleum product sales underscores the complexities within Nigeria’s oil sector, particularly concerning currency mismatches and contractual agreements. Swift and effective interventions by stakeholders are essential to mitigate potential fuel price hikes and ensure the stability of the nation’s fuel supply chain.
