The Dangote Petroleum Refinery has received four cargoes of crude oil from the Nigerian National Petroleum Company Limited (NNPCL) under the naira-for-crude agreement, as confirmed by officials of the refinery and the Federal Government on Tuesday.
These four cargoes were delivered within the past three weeks after the government initiated the sale of crude oil to local refineries in naira. According to sources familiar with the deal, the refinery expects additional shipments of crude from NNPCL, which oversees the country’s hydrocarbon resources.
The $20 billion Lekki-based refinery is now set to begin the direct sale of refined Premium Motor Spirit (PMS), commonly known as petrol, to local dealers.
An official close to the Technical Subcommittee on Domestic Sale of Crude Oil in Local Currency, who spoke on condition of anonymity, confirmed that more crude deliveries to the Dangote refinery are expected in the coming weeks. The programme initially started with the Dangote refinery, as it is currently the only petrol-producing facility in Nigeria.
A senior official at the refinery confirmed the start of the naira-for-crude deal, explaining that the initial phase would last six months, with the possibility of renewal by the Federal Government. However, the official was unable to specify the exact cost per barrel of crude oil in this arrangement.
The refinery, with a capacity of 650,000 barrels per day, faced initial challenges in securing crude supplies when it first began operations a few months ago. Alhaji Aliko Dangote, President of the Dangote Group, previously raised concerns about attempts by international oil companies (IOCs) to sabotage the refinery by withholding crude supplies, insisting on selling through foreign agents instead.
The refinery also noted that local crude prices had been increasing due to trading arms offering crude at $2 to $4 per barrel above the official price. The group highlighted that foreign producers seemed to prioritize selling Nigerian crude to Asian countries.
Read Also: What is Bluesky? Everything You Need to Know About the X Competito
Despite the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) stepping in to resolve the issue in July, Dangote Industries Limited’s Vice President for Oil & Gas, Mr. Devakumar Edwin, claimed that the IOCs continued to frustrate the refinery’s crude supply efforts.
In July, President Bola Tinubu proposed a plan during a Federal Executive Council (FEC) meeting to sell crude oil to local refineries in naira. The FEC adopted this proposal, allowing the sale of crude oil to the Dangote refinery and other upcoming local refineries in the local currency. It was reported that 450,000 barrels, designated for domestic consumption, would be sold in naira to Nigerian refineries, with the Dangote refinery being the pilot recipient.
A media aide to the President, Bayo Onanuga, stated in July that the exchange rate for the transaction would be fixed for its duration. However, it remains unclear whether the exchange rate has been fixed in the current transaction with Dangote.
Industry experts suggest that local petrol prices may decline if the government continues to supply crude to local refineries at a fixed exchange rate, potentially pegged at N1,000 to the dollar instead of the current N1,600 rate.
The implementation committee overseeing this initiative, led by Edun, announced that the naira-for-crude deal commenced on October 1. As per the agreement, NNPCL will supply approximately 385,000 barrels per day to the Dangote refinery, amounting to about 11.5 million barrels per month. In return, the refinery will supply equivalent volumes of refined products like petrol and diesel to the domestic market, also in naira.
With four cargoes already received, the Dangote refinery is expected to supply petrol, diesel, and aviation fuel to local marketers, all priced in naira.
Chinedu Ukadike, the National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), welcomed the crude supply to the Dangote refinery, stating it would help resolve the shortfall in PMS supply experienced by the NNPC and other marketers. He expressed optimism that the refinery’s operations would address any future shortfall in petroleum product supply.
Additionally, a significant drop in petrol imports to Nigeria has been observed. According to S&P Global Commodity Insights, petrol shipments in the first two weeks of October fell sharply due to the start of local production from the Dangote refinery.
As local production ramps up, analysts anticipate further reductions in gasoline imports and expect domestic refining capacity to lessen Nigeria’s reliance on foreign fuel imports. However, challenges remain as traders flagged potential shortages due to the current production volume not yet meeting Nigeria’s daily consumption of over 300,000 barrels per day.
Despite these initial setbacks, the Dangote refinery is expected to help Nigeria reduce its dependence on imported petroleum products. With continued government support and increased crude supply, the refinery aims to transform Nigeria’s energy landscape while enhancing its role in the global petroleum market.
