Concerns are growing over a potential disruption in Nigeria’s petrol supply as the naira-for-crude agreement between the Nigerian National Petroleum Company (NNPC) Limited and Dangote Refinery experiences delays.
The initiative was designed to enable local refiners, including Dangote Refinery, to purchase crude oil in naira rather than US dollars, ensuring a steady supply of raw materials for domestic refining. However, reports indicate that the deal has stalled, raising fears of possible fuel shortages.
Despite its massive 650,000-barrel-per-day refining capacity, Dangote Refinery has reportedly been unable to secure crude oil from local producers. The primary reason for this setback is the NNPC’s failure to fulfill its crude-for-refined-products swap agreement, which was meant to guarantee a consistent supply to the refinery.
In response to these challenges, Dangote Refinery is said to be exploring alternative crude oil sources. Reports indicate that the company is considering increasing crude oil imports from Angola and Algeria while negotiations with the Nigerian government continue.
According to Bloomberg data, the refinery has received over three million barrels of American crude since the beginning of the month. Additionally, it has sourced Angola’s Pazflor crude and Algeria’s Saharan Blend from Glencore Plc in recent weeks.
Analysts from Energy Aspects Ltd. report that crude deliveries to Dangote Refinery have averaged 450,000 barrels per day over the past two weeks, a notable increase from 380,000 barrels per day recorded in January and February.
The naira-for-crude agreement, introduced by the federal government, was aimed at ensuring domestic refineries received a reliable crude supply. Under this arrangement, the NNPC was expected to provide crude oil to Dangote Refinery in exchange for refined petroleum products, which would then be distributed nationwide to stabilize the fuel market.
However, sources indicate that the deal remains stalled, with refiners still relying on international crude suppliers and making payments in US dollars.
A disruption in Dangote Refinery’s petrol supply could worsen Nigeria’s already fragile fuel distribution system. Despite being Africa’s largest oil producer, Nigeria has historically depended on imported petroleum products to meet local demand.
Having commenced operations in 2023, Dangote Refinery was widely regarded as a transformational project that would reduce fuel imports and help stabilize prices. However, if its domestic crude supply remains uncertain, the refinery may be forced to continue prioritizing fuel exports rather than supplying the Nigerian market.
This could lead to fuel shortages and price hikes, further straining consumers and businesses that are already struggling with high inflation and economic instability.
Although Dangote Industries has yet to release an official statement regarding the stalled deal, sources indicate that the refinery is actively exploring alternative crude supply arrangements.
Meanwhile, industry experts have urged the federal government and the NNPC to urgently resolve the issues delaying the naira-for-crude agreement. They argue that ensuring a consistent supply of crude to domestic refineries is critical for Nigeria’s energy security and long-term economic stability.
With fuel supply uncertainties looming, all stakeholders must work swiftly to resolve the bottlenecks and safeguard Nigeria’s energy future.
