ECONOMIC policy analyst, Vincent Nwanma, has provided insights into the broader implications of Dangote Refinery’s decision to price petrol, diesel and aviation fuel in United States dollars.
Speaking with The ICIR following the refinery’s announcement on Monday, July 13, that it had adopted dollar-denominated pricing for refined petroleum products, Nwanma said the move was primarily a financial risk management strategy designed to shield the refinery from foreign exchange losses rather than an attempt to compel Nigerians to buy fuel in dollars.
“It means we are now paying the naira equivalent of the international price of petroleum products. The prices could change at any time depending on the exchange rate and global pricing,” he said.
He, however, warned that the development could expose Nigerians to more frequent changes in fuel prices and deepen the economy’s dependence on exchange rate movements.
Dangote Refinery on Monday fixed its ex-depot petrol price at $0.779 per litre, while diesel will sell for $1.087 per litre, and aviation fuel at $0.942 per litre, ending the naira-based pricing regime that followed the commencement of the Federal Government’s naira-for-crude initiative in October 2024.
According to the refinery, the shift became necessary because a growing share of its crude oil purchases is now denominated in dollars, exposing it to exchange-rate risks when refined products are sold in naira.
Industry sources say the refinery’s decision followed growing imbalances between the currency used to procure crude oil and the currency used to sell refined products.
Although the Federal Government introduced the naira-for-crude arrangement to reduce pressure on foreign exchange demand and stabilise domestic fuel prices, implementation challenges reportedly resulted in a larger proportion of crude supplies reverting to dollar-denominated transactions.
The refinery said all previously issued naira-denominated invoices had been withdrawn, with marketers expected to purchase products using the new dollar benchmark.
Nwanma explained that the refinery was seeking to avoid what economists describe as a currency mismatch, a situation where costs are incurred in one currency while revenue is earned in another.
“When you borrow or incur costs in dollars and sell in naira, you run the risk that if the naira depreciates, you may no longer recover your costs adequately. What Dangote is doing is hedging against that currency risk,” he said.
He described the pricing model as a standard financial hedging mechanism widely used by businesses operating in volatile foreign exchange environments.
While stressing that consumers would still pay for petrol in naira, he warned that the value Nigerians pay would increasingly mirror international fuel prices and fluctuations in the foreign exchange market.
“It does not mean Nigerians will buy petrol in dollars. Nigerians will pay the naira equivalent of the dollar price,” he explained.
According to him, the implication is that domestic fuel prices may no longer remain relatively stable for extended periods because they will be directly influenced by movements in both global oil prices and the naira-dollar exchange rate.
“It means we are now paying the naira equivalent of the international price of petroleum products. The prices could change at any time depending on the exchange rate and global pricing,” he said.
He noted that motorists, commercial transport operators, manufacturers and households could experience more frequent adjustments in fuel costs, with the effects likely to spread across transportation fares, food prices and other goods and services that rely heavily on petroleum products.
Given Dangote Refinery’s position as Nigeria’s dominant supplier of refined fuel, he said its pricing decisions would have significant implications across the downstream petroleum market.
Nwanma said the development also placed renewed pressure on Nigeria’s monetary authorities to sustain exchange rate stability.
According to him, the long-term impact of the new pricing regime will largely depend on whether the Central Bank of Nigeria and economic managers can prevent further depreciation of the naira.
“If the naira weakens, customers will inevitably pay more. If the naira strengthens, Nigerians could begin to enjoy more affordable fuel,” he said.
He argued that sustaining exchange-rate stability, boosting domestic productivity, expanding exports and increasing foreign exchange reserves should become immediate priorities for government if it hopes to cushion future fuel price shocks.
“This is now a challenge for the Central Bank and the managers of the economy. We need policies that strengthen the naira through increased productivity, stronger exports and higher foreign reserves.”
Nanji is an investigative journalist with the ICIR. She has years of experience in reporting and broadcasting human angle stories, gender inequalities, minority stories, and human rights issues. She has documented sexual war crimes in armed conflict, sex for grades in Nigerian Universities, harmful traditional practices and human trafficking.