Analysts have warned that the suspension of the naira-for-crude oil swap deal by the Nigerian National Petroleum Company (NNPC) Limited with domestic refiners, including Dangote Refinery, could trigger importation and high fuel costs.
The decision, which took immediate effect, has sparked discussions about its implications for Nigeria’s energy sector and the broader economy.
The ICIR reports that the naira-for-crude arrangement, introduced on October 1, 2024, allowed local refiners to purchase crude oil in naira instead of dollars.
The initiative was designed to support domestic refining capacity, reduce reliance on imported petroleum products, and stabilise the local currency by easing pressure on foreign exchange reserves.
“Crude-for-naira swap wasn’t a transparent deal between Dangote and the Nigeria National Petroleum Company Limited. The market is experiencing some form of dynamism and the marketers are incurring losses currently. Let me tell you the landing cost is now between N845-N850 and many of them are still selling at a price close to that. Maybe from henceforth, we will get a clearer picture of what the price is,” an oil governance expert, Henry Ademola Adigun told The ICIR.
The termination of the agreement means that Nigerian refineries, including the much-anticipated Dangote facility, will now have to source crude oil from international suppliers, paying in dollars instead of naira.
This shift is expected to escalate operational costs, potentially leading to higher fuel prices at the pump.
According to informed sources familiar with the development, the NNPC informed local refiners that it has already committed its crude oil production to forward contracts, leaving no supply available for domestic refineries. This revelation comes despite reports that Nigeria’s crude output has increased since the deal first began.
The suspension has raised concerns among industry stakeholders, particularly for the Dangote Refinery, which is poised to become one of Africa’s largest refining facilities.
The refinery, owned by billionaire Aliko Dangote, has been a key beneficiary of the naira-for-crude deal, as it relies on locally sourced crude to meet its refining needs. Analysts fear the suspension could delay the refinery’s operational timeline and increase costs.
Other private refiners, including Waltersmith Petroman and BUA Refinery, are also expected to feel the impact. The deal had provided them with a cost-effective way to secure crude oil feedstock, enabling them to compete with international players.
Economic watchers warned that the suspension could have ripple effects on Nigeria’s economy. The naira has already faced significant pressure in recent months, and the removal of this dollar-saving mechanism could exacerbate the currency’s volatility.
Additionally, the move may hinder efforts to achieve self-sufficiency in petroleum production, a key goal of the federal government.
Commenting on the development, former chairman of the Major Marketers Association of Nigeria (MOMAN), Adetunji Oyebanji told The ICIR that the development would open up the market dynamism more and ensure stability.
“Marketers who import will have a clearer picture of the landing cost and we will gradually see the market dynamism. Not everyone is part of the crude swap deal so people can also easily choose where they want to buy from,” he added.
The ICIR reported that the federal government said it had completed all agreements and modalities for the sale of crude to Dangote Petrochemical Refinery and other local refineries in Naira, with the Nigerian National Petroleum Company Limited (NNPCL) as the sole off-taker of refined petrol from Dangote Petrochemical Refinery.
Meanwhile, in a latest development, the NNPCL in a clarification statement noted that the contract for the sale of crude oil in Naira was structured as a six-month agreement, subject to availability, and expires at the end of March 2025, adding that, “Discussions are currently ongoing towards emplacing a new contract.”
“Under this arrangement, NNPC Ltd. has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024. In aggregate, NNPC Ltd. has made over 84 million barrels of crude oil available to the Refinery since its commencement of operations in 2023,”the NNPCL clarified in a statement issued on Monday, March 10, by its chief corporate communications officer, Olufemi Soneye
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.