Petrol Price Hike Likely as NNPC Ends Naira-for-Crude Supply to Local Refineries

The Nigerian National Petroleum Company (NNPC) Limited has halted its naira-for-crude oil supply arrangement with the Dangote Petroleum Refinery and other domestic refineries, a move that may trigger an increase in petrol prices across the country.

Initiated on October 1, 2024, the naira-for-crude deal was designed to strengthen local refining, cut back on costly petroleum imports, and ease pump prices by selling crude oil in naira rather than U.S. dollars. However, multiple sources confirm that the initiative has now been suspended and may not resume until 2030.

According to insiders, NNPC has informed local refiners that it has forward-sold all of its crude production, effectively ending the supply arrangement. This means refineries like Dangote will now have to turn to international markets to source crude, a costly alternative that requires payment in foreign currency and could strain their operations.

Despite an uptick in Nigeria’s crude production levels, industry experts say this development undermines recent efforts to build domestic refining capacity. In just five months, Nigeria has spent over $4.3 billion importing 6.38 billion litres of petrol and diesel, further highlighting the gap left by underutilized local refining.

The decision has also raised concerns about potential volatility in the foreign exchange market. Analysts warn that relying on dollar-based crude purchases could erode recent gains made in currency stabilization and exert additional pressure on the naira.

The move comes amid growing public anticipation for lower fuel prices. However, sources say the NNPC made the decision unilaterally, despite previous commitments to ensure a steady supply of crude to domestic refineries.

While Dangote Petroleum Refinery has yet to issue an official statement, a company representative noted that they are evaluating their options in light of the new development. In the past, Dangote executives had expressed frustration over inadequate crude allocations from NNPC. The refinery, which requires 650,000 barrels per day to operate at full capacity, was supposed to receive 385,000 barrels per day under the agreement—but even that target was reportedly never met.

The NNPC has yet to respond to requests for comment.