The Nigerian downstream oil and gas sector is facing significant uncertainty as a crucial naira-for-crude oil deal between the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote Petroleum Refinery reaches its expiration date. This agreement, initiated in October 2024, allowed Dangote Refinery to purchase crude oil using Naira, the Nigerian currency, rather than US dollars. This arrangement aimed to stabilize and potentially reduce fuel prices, conserve foreign exchange, and ensure a consistent supply of petroleum products within the country. The deal’s potential expiration has triggered anxiety among stakeholders, including marketers and consumers, with petrol prices already experiencing a sharp increase, rising from N860 per liter to over N930 per liter within a week. The looming possibility of further price hikes, potentially reaching N1,000 per liter, has amplified concerns about the cost of living and the impact on the Nigerian economy.
The crux of the issue lies in the ongoing negotiations for the deal’s renewal. A committee tasked with deliberating the extension has yet to reach a resolution, contributing to the current market instability. While an insider within the finance ministry indicated that discussions have stalled, there is hope that deliberations will resume after the recent public holidays. The delay in reaching an agreement has created a ripple effect throughout the downstream sector, impacting depot owners, retailers, and ultimately, consumers. The initial success of the naira-for-crude deal in stabilizing petrol prices has underscored its importance in the current economic climate, further exacerbating the anxiety caused by the negotiation impasse.
Adding to the complexity of the situation, the Dangote Refinery, with a production capacity of 650,000 barrels per day, is scheduled for a 30-day maintenance shutdown of its petrol production unit in June. This planned maintenance, coupled with the uncertainty surrounding the naira-for-crude deal, creates a potential supply constraint that further threatens to destabilize the market and drive prices higher. The convergence of these two factors—the potential deal termination and the refinery maintenance—presents a significant challenge for the Nigerian downstream sector and underscores the urgency of resolving the ongoing negotiations.
The naira-for-crude arrangement initially proved beneficial, providing the Dangote Refinery with 48 million barrels of crude oil and contributing to a total supply of 84 million barrels since the refinery commenced operations in 2023. However, the deal encountered a significant hurdle when the Dangote Refinery announced a temporary suspension of petroleum product sales in Naira on March 19, 2025. This decision stemmed from a mismatch between the refinery’s sales revenue in Naira and its crude oil purchase obligations, which are denominated in US dollars. This mismatch created a financial imbalance for the refinery, forcing it to halt Naira-denominated sales to align its revenue stream with its dollar-denominated expenses.
Marketers attribute the current price hikes to the Federal Government’s reluctance to renew the naira-for-crude deal. They argue that the deal’s termination has directly contributed to the increasing cost of petrol, warning against burdening citizens with dollar-denominated fuel prices. Industry stakeholders, including the Independent Petroleum Marketers Association of Nigeria (IPMAN), have voiced their concerns and called for a stakeholders’ meeting to address the issue and chart a way forward. This meeting, initially scheduled for the last week of April, has been postponed to May 1, 2025, due to the Eid-el-Fitr and Easter holidays, further delaying a potential resolution to the crisis.
The uncertainty surrounding the naira-for-crude deal has generated significant financial losses for marketers, exceeding N200 billion due to price fluctuations. This volatility discourages bulk buying, further destabilizing the market. Accusations have been leveled against the NNPCL, suggesting that the company’s use of future crude oil production as collateral for international loans has limited its ability to supply the domestic market adequately. This accusation, if true, reveals a deeper systemic issue within the Nigerian oil sector that requires urgent attention. As Nigerians grapple with rising fuel prices and increased transportation costs, the need for a swift and decisive resolution to the naira-for-crude deal negotiation becomes increasingly critical. The government’s response to this situation will significantly impact the country’s economic stability and the well-being of its citizens.
