Paragraph 1: The Naira-for-Crude Deal and Renewal Negotiations
The Nigerian National Petroleum Company Limited (NNPCL) and Dangote Petroleum Refinery are engaged in negotiations to renew their naira-for-crude agreement, set to expire on March 31, 2025. This agreement, initiated in October 2024, allows Dangote Refinery to purchase crude oil from NNPCL using Nigerian naira instead of US dollars. The initial six-month contract aimed to bolster domestic refining, reduce reliance on imported petroleum products, and potentially lower fuel prices for Nigerian consumers. The NNPCL confirmed that discussions for a new contract are underway, dismissing reports of the deal’s termination. The original agreement involved the supply of 48 million barrels of crude oil to Dangote Refinery between October 2024 and March 2025.
Paragraph 2: Crude Oil Supply and Valuation
Since the refinery began operations in 2023, the NNPCL has supplied a total of 84 million barrels of crude to Dangote. The naira-for-crude transactions were valued at $373.76 million, with payments made in naira based on an Afrexim Bank-advised exchange rate, totaling N486.31 billion (approximately $625 million USD). The NNPCL operates a credit facility with a 45-day payment window for Dangote Refinery, starting from the lifting date of the crude. As of February 2025, documents revealed outstanding payments of $126.99 million (N199.96 billion). Data concerning the specific volumes of refined products returned to the NNPCL under the agreement was unavailable.
Paragraph 3: Government Commitment to Naira-for-Crude Policy
Government officials affirmed their commitment to the naira-for-crude policy. Zacch Adedeji, Chairman of the Technical Sub-Committee on the deal, emphasized that termination was never considered and that the policy has proven beneficial to the Nigerian economy. He stated that the policy fosters competitive pricing, ensures a stable supply of crude oil for domestic refining, and reduces reliance on foreign exchange. Adedeji highlighted the Nigerian Upstream Petroleum Regulatory Commission’s role in ensuring compliance with the Domestic Crude Oil Obligations of the Petroleum Industry Act, which mandates a certain percentage of crude oil production for local refineries.
Paragraph 4: Expanding the Naira-for-Crude Framework
The Crude Oil Refinery-Owners Association of Nigeria (CORAN) anticipates the expansion of the naira-for-crude deal to include modular refineries beyond Dangote. CORAN’s Publicity Secretary, Eche Idoko, confirmed that the initial focus on Dangote Refinery was due to its capacity to produce petrol, which aligned with one of their immediate strategic objectives. This was a pilot phase to test the practicability of the arrangement. The planned second phase, beginning after March 2025, aims to incorporate modular refineries with a combined capacity of 27,000 barrels per day. CORAN urged the government to honor its commitment to supply these refineries with crude, emphasizing the importance of modular refineries in producing diesel, a crucial fuel for transportation and other sectors.
Paragraph 5: Benefits of the Naira-for-Crude Agreement
Idoko highlighted the positive impacts of the naira-for-crude deal, pointing to reduced product prices and a strengthened naira against the dollar. He advocated for the inclusion of all refineries in the subsequent phase of the agreement. The NNPCL also stated that the arrangement is subject to the availability of crude oil. The overall objective being to strengthen the naira, reduce demand for foreign exchange, shore up local refinery capacity, and ensure stable local fuel supplies.
Paragraph 6: Crude Oil Lifting Details and Reporting
Details of crude oil liftings by Dangote Refinery between October 2024 and February 2025 were obtained from NNPCL presentations at the Federal Account Allocation Committee (FAAC) meetings. These reports reveal varying daily crude oil allocations to Dangote Refinery, ranging from as high as 598,125 barrels on October 14, 2024, to a low of 5,000 barrels on October 30, 2024. The reports detail specific transactions, including invoice numbers, unit prices, total values in dollars and naira, and exchange rates used for conversion. The reporting process involves a time lag, with figures for a given month typically presented at the following month’s FAAC meeting. For example, December 2024 data was shared during the February 2025 meeting, and it is expected that January and February data will be disclosed in the March and April meetings respectively. Data on the quantity and type of refined products received from Dangote under the deal was notably absent from the reports reviewed.
