The Nigerian National Petroleum Company Limited (NNPCL) has begun negotiations with Dangote Petroleum Refinery to renew the naira-for-crude oil supply agreement. The current deal, which allows local refineries to purchase crude in naira instead of U.S. dollars, is set to expire on March 31, 2025.
NNPCL issued a statement on Monday to counter claims that it had canceled the agreement until 2030 due to forward-selling all its crude oil. The company confirmed that discussions are ongoing to establish a new contract.
Breakdown of the Naira-for-Crude Deal
- Initial Agreement: The naira-for-crude policy was introduced on October 1, 2024, to supply crude oil to Nigerian refineries in local currency. The goal was to reduce the country’s dependence on foreign refined products, lower import costs, and stabilize fuel prices.
- Crude Supply to Dangote Refinery: Between October and December 2024, the Dangote Refinery received approximately ₦486.31 billion ($373.76 million) worth of crude oil under the agreement.
- Total Supply Since 2023: Since the refinery began operations in 2023, NNPCL has provided it with 84 million barrels of crude oil, with 48 million barrels supplied under the naira-for-crude deal.
Government’s Position
Zacch Adedeji, the Chairman of the Technical Sub-Committee on the deal, reaffirmed that the policy remains in effect and has positively impacted the Nigerian economy. He emphasized that there has been no discussion about discontinuing the policy.
“The policy framework allowing the sale of crude oil in naira for domestic refining remains intact. There is clear evidence that this approach is beneficial to the economy, ensuring stable supply and optimizing local refining capacity,” Adedeji stated.
The Federal Inland Revenue Service (FIRS) also confirmed that local refineries are not being excluded from domestic crude supply. The Nigerian Upstream Petroleum Regulatory Commission is enforcing compliance with the Petroleum Industry Act, ensuring fair access to crude oil for all local refineries.
Calls for Government Commitment
Eche Idoko, the Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria, emphasized that the contract renewal was expected and should include other local refineries, not just Dangote Refinery.
“The government assured us last year that after the pilot phase with Dangote, the second phase would involve modular refineries with a capacity of 27,000 barrels per day,” Idoko said. “Diesel is essential for trucks that transport food, which affects product prices. We hope the government fulfills its promise to include other refineries.”
Financial Breakdown of the Crude Transactions
An analysis of crude oil deliveries between October and December 2024 shows significant supply to Dangote Refinery:
- October 14, 2024: The refinery received its highest crude allocation of 598,125 barrels, valued at $46.99 million (₦76.54 billion at an exchange rate of ₦1,635 per dollar).
- October 30, 2024: The lowest allocation was 5,000 barrels, valued at $390,943 (₦600.03 million at ₦1,534 per dollar).
- November 4, 2024: Two transactions supplied 798,374 barrels at a unit price of $75.82 per barrel, totaling $60.53 million (₦100.87 billion at ₦1,666 per dollar).
- December 2, 2024: The refinery received 799,737 barrels at $74.87 per barrel, totaling $59.87 million (₦93.59 billion at ₦1,562 per dollar).
- December 11, 2024: A supply of 233,401 barrels at $76.21 per barrel amounted to $17.79 million (₦23.03 billion at ₦1,294 per dollar).
The documents also indicated a pending crude supply of 956,061 barrels valued at $71.61 million, which was postponed to January 2025.
Conclusion
Despite speculation about the deal’s cancellation, NNPCL has confirmed that the naira-for-crude policy remains in place, and negotiations for a renewed agreement are ongoing. The initiative has contributed to stabilizing fuel prices and supporting the local economy. However, industry stakeholders urge the government to expand the program to include other refineries, ensuring broader benefits for the country’s refining sector.
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