A controversial naira-for-crude arrangement between the Nigerian government and refiners, including the giant Dangote Refinery, is facing major setbacks due to the impact of oil-backed loans on the country’s crude oil production.
The naira-for-crude deal is designed to supply domestic refiners with crude oil in exchange for naira payments. With the deal now stalled, local refineries rely on international suppliers for feedstock, incurring huge costs in dollars. Multiple sources confirm that the Nigerian National Petroleum Company Limited (NNPC) is unable to meet its crude oil supply obligations to local refineries due to its focus on servicing oil-backed loans.
These loans, which are tied to future crude oil production, take precedence over domestic supply commitments, leaving refineries like Dangote and others scrambling for feedstock.
“The loans take precedence, and there’s simply not enough crude to go around,” says an industry insider who requests anonymity.
A source states that the NNPC has notified Dangote Petroleum Refinery and other local refiners that it will no longer provide crude oil to them, as it has forward-sold all of its crude supplies until 2030. Another source adds that at a time when Nigerians hope for further price reductions, “the NNPC unilaterally decides to end the naira-for-crude initiative.”
NNPC’s Position
The NNPC clarifies its stand on the crude-for-naira sales arrangement, stating that the contract for the sale of crude oil in naira is structured as a six-month agreement and subject to availability. Olufemi Soneye, chief corporate communications officer of NNPC, says the contract for the sale of crude oil in naira expires at the end of March 2025.
He states, “NNPC Limited has noted recent reports circulating on social media regarding the alleged unilateral termination of the crude oil sales agreement in Naira between NNPC and Dangote Refinery.
“To clarify, the contract for the sale of crude oil in Naira is structured as a six-month agreement, subject to availability, and expires at the end of March 2025.”
He explains that discussions are ongoing toward a new contract, noting that under this arrangement, NNPC has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024. According to him, in aggregate, NNPC has made over 84 million barrels of crude oil available to the refinery since it commenced operations in 2023.
“NNPC Limited remains committed to supplying crude oil for local refining based on mutually agreed terms and conditions,” he says.
Oil Loans in Spotlight
Experts argue that the NNPC has already committed its crude oil production to forward contracts, leaving no supply available for domestic refineries. Africa Intelligence, a French-based publication, reports that the NNPC is finalizing a fresh $2 billion loan to balance its finances and invest in new oil installations to raise crude oil production.
Nigeria’s Oando Group, led by Adewale Tinubu, and the Abu Dhabi National Oil Company (ADNOC) are among the parties financing the loan. However, Africa Intelligence notes that Oando and ADNOC decline to comment when contacted.
As for the NNPC, it tells Africa Intelligence that “at this stage, it is premature to discuss or disclose details regarding any deal that has not been finalized.”
Reports show that NNPC pledges 272,500 barrels per day of crude oil through a series of crude-for-loan deals totaling $8.86 billion. By pledging 272,500 barrels daily, about 8.17 million barrels of crude per month are allocated for different loan deals by the national oil firm.
An analysis of a report by the Nigeria Extractive Industries Transparency Initiative (NEITI) and the NNPC’s financial statements shows that under these deals, notable projects include: Project Panther, Project Bison, Project Eagle Export Funding (Original, Subsequent, and Subsequent 2 Debts), Project Yield, and Project Gazelle.
The NNPC has already fully repaid $2.61 billion in loans, representing 29.4 percent of the total credit facility, while $6.25 billion or 70.6 percent remains outstanding. Also, out of the $8.86 billion credit facility, only about $6.97 billion has been received from seven crude-for-loan deals.
Dangote Not Getting Enough
The Dangote Refinery, Africa’s largest refinery with a capacity of 650,000 barrels per day, is particularly affected. Despite its potential to transform Nigeria’s energy landscape, the refinery faces delays in securing consistent crude oil supplies, hampering its operations.
According to the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Dangote refinery is expected to process 550,000 barrels per day and 17.05 million barrels per month during the first half of 2025.
However, data under the naira-for-crude arrangement shows the refinery is only allocated 61,290 barrels per day for February 2025. For the entire month of February, the refinery is assigned 6.5 million barrels, but this allocation drops to 4.75 million barrels for March. Out of the 4.75 million barrels, only 1.9 million barrels are designated for purchase in naira, with the remaining barrels to be bought in US dollars.
“We need 650,000 barrels per day. The state oil firm agrees to give a minimum of 385,000 bpd, but they are not even delivering that,” Edwin Devakumar, vice-president of Dangote Industries Limited (DIL), says. While Devakumar declines to give specific figures, he describes the NNPC’s supply as ‘peanuts.’
