The Nigerian National Petroleum Company Limited (NNPCL) has moved to dispel widespread speculation regarding the alleged termination of its naira-for-crude agreement with the Dangote Refinery and other local refineries.
The state-run oil company clarified that the deal was originally structured as a six-month agreement, subject to renewal and availability, and is set to expire at the end of March 2025.
The controversy arose following reports suggesting that NNPCL had abruptly ended the naira-based crude supply arrangement, effectively forcing Dangote Refinery and other local refiners to purchase crude in US dollars. The reports triggered concern among industry stakeholders and the public, given the potential impact on fuel prices and the already struggling naira.
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In a statement issued on Monday, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, addressed the matter, stating that discussions are ongoing to finalize a new supply agreement after the current one lapses. He reiterated that NNPCL remains committed to supporting domestic refining operations and that there has been no policy shift terminating local crude supply in naira.
“NNPCL has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024 under this arrangement. In total, over 84 million barrels of crude oil have been supplied since the refinery commenced operations in 2023,” Soneye said.
He reaffirmed that NNPCL is fully committed to ensuring the supply of crude oil for local refining, based on mutually agreed terms and conditions, dismissing reports of a sudden disruption.
Federal Government Backs Naira-Based Crude Supply Policy
Amid the concerns raised by reports of the deal’s alleged termination, the Federal Government also reaffirmed its commitment to the naira-for-crude policy, clarifying that it has not been scrapped or reviewed for discontinuation.
In a separate statement on Monday, Zacch Adedeji, Chairman of the Federal Inland Revenue Service (FIRS) and head of the Technical Sub-Committee on Domestic Crude Supply addressed the controversy, stating that the policy remains intact.
According to Adedeji: “The policy framework enabling the sale of crude oil in naira for domestic refining remains in force. There has been no decision at the policy level to discontinue this approach, nor is it being considered. After implementing the policy for some months, evidence abounds that it is the right way to go, and it will continue to help the economy.”
He also emphasized that local refineries have not been excluded from the domestic crude supply, adding that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is ensuring full compliance with the Domestic Crude Oil Obligations (DCO) provisions of the Petroleum Industry Act (PIA).
Adedeji explained that the engagement process for crude allocation to local refineries remains in place and is governed by structured agreements that take into account factors such as availability, demand, and market conditions.
“There is no exclusion of local refineries from access to domestic crude. The Federal Government remains committed to ensuring the efficient execution of this initiative in line with its core objectives—enhancing local refining, reducing foreign exchange exposure, and stabilizing the domestic fuel supply,” he said.
Background of the Naira-for-Crude Policy
The naira-for-crude initiative was introduced in July 2024, when the Federal Executive Council (FEC) directed NNPCL to sell crude oil to Dangote Refinery and other local refiners in naira instead of US dollars.
This policy was introduced as part of broader efforts to:
- Reduce Nigeria’s reliance on foreign exchange for crude purchases, thereby easing pressure on the country’s foreign reserves.
- Stabilize domestic fuel prices, as the pricing of crude in naira would help shield Nigeria from the volatility of the international oil market.
- Promote domestic refining capacity, ensuring that local refineries have priority access to crude without the constraints of forex shortages.
The initiative was seen as a bold move to strengthen Nigeria’s refining sector, particularly at a time when import dependence and foreign exchange scarcity were putting immense strain on the economy. The expectation was that by removing the need for local refiners to source dollars, the government could ease pressure on the naira while ensuring that refined petroleum products remain affordable for Nigerians.
The speculation that the policy had been scrapped sparked widespread alarm because of the potential economic fallout. If NNPCL were to suddenly halt crude sales to local refineries in naira, it would mean that refineries like Dangote would have to buy all crude on the international market in dollars. This would have severe consequences for fuel pricing and the already fragile naira exchange rate.
Removing the naira-based crude arrangement would increase pressure on Nigeria’s forex reserves, as refineries would require billions of dollars to purchase crude, further weakening the naira against the US dollar.
Analysts warn that if local refineries were forced to buy crude in dollars, they would have to pass the cost onto consumers, potentially leading to a sharp increase in the prices of petrol, diesel, and other refined products. Given the current economic challenges, such an outcome could further worsen inflation and worsen the cost-of-living crisis in Nigeria.