The Dangote Refinery, Africa’s largest oil refining facility, is reportedly considering increasing its crude oil imports from Angola and Algeria as discussions with the Nigerian government over a naira-for-crude oil arrangement remain inconclusive.
The proposed naira-for-crude initiative was designed to bolster the local currency and reduce Nigeria’s dependence on foreign exchange in crude oil transactions. However, recent developments suggest that the deal may be facing serious hurdles.
Valued at $19 billion, the Dangote Refinery represents a critical part of Nigeria’s strategy to achieve self-sufficiency in refined petroleum products and reduce the country’s longstanding reliance on imported fuel. Since beginning operations, the refinery has made strides in cutting fuel imports, but as it moves closer to full operational capacity, securing an adequate and steady supply of crude has become a pressing concern.
According to data from Bloomberg, the refinery has already imported over three million barrels of American crude oil in recent weeks. In addition, it has sourced crude from closer African neighbors, including a shipment of Angola’s Pazflor grade and Algeria’s Saharan Blend, the latter reportedly procured via Glencore Plc.
Industry experts, including analysts from Energy Aspects Ltd., have noted that crude deliveries to the Dangote Refinery have surged to an average of 450,000 barrels per day (bpd) over the past two weeks, up from approximately 380,000 bpd earlier in January and February. “Our satellite monitoring indicates a recent drawdown in crude stockpiles at the refinery, suggesting a ramp-up in operations,” observed Randy Hurburun, a senior refining analyst at Energy Aspects.
Despite this growing demand, there are concerns over whether local supplies can keep pace.
Adding to the refinery’s challenges is the uncertainty surrounding the naira-for-crude deal. Although initially set up to ensure local refiners like Dangote would have access to Nigerian crude paid for in naira, the deal has hit significant roadblocks.
Earlier reports indicated that Nigerian National Petroleum Company Limited (NNPC Ltd.) had suspended the naira-for-crude program until 2030, citing that it had forward-sold all its available crude. However, in a swift response, NNPC Ltd. clarified that negotiations for a fresh naira-based supply deal with Dangote were still ongoing.
Analysts have warned that discontinuing the naira-for-crude framework could destabilize Nigeria’s foreign exchange market, possibly eroding recent gains in the naira’s value. More broadly, the situation casts doubt on the government’s policy direction regarding local refining and energy security.
Initially, in October 2024, the Federal Executive Council (FEC) approved a plan to allocate 450,000 barrels per day for local refining, to be sold in naira to domestic refiners. Dangote was expected to receive 385,000 bpd under this scheme as a pilot project.
However, implementation quickly ran into difficulties, as NNPC Ltd. reportedly struggled to meet its commitments. By November 2024, Dangote officials had raised concerns about inadequate crude supply, signaling trouble for the initiative. “We need 650,000 barrels per day. NNPC agreed to supply a minimum of 385,000 bpd, but even that is not being delivered,” lamented Edwin Devakumar, Vice President of Dangote Industries Limited (DIL).
The current situation underscores persistent challenges in Nigeria’s petroleum sector, particularly regarding domestic refining capacity and stable crude oil supply. With the naira-for-crude deal in limbo and rising dependence on foreign crude, concerns are mounting about the future cost of fuel, the refinery’s operational sustainability, and Nigeria’s broader energy security.
As the Dangote Refinery continues to ramp up production, all eyes remain on the outcome of ongoing talks with the government and NNPC Ltd. — negotiations that could determine the next chapter in Nigeria’s oil and gas sector.
