The Nigerian National Petroleum Company Limited (NNPC) will supply crude oil in naira to the Dangote Petroleum Refinery for an initial period of six months, pending further review by the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency.
Multiple sources from both the committee and the Dangote refinery confirmed this development on Tuesday, noting that while crude oil is an international product priced in dollars, the naira-for-crude agreement will remain in place for the first phase.
Bloomberg reported that the Federal Government plans to deliver up to 400,000 barrels of Nigerian crude oil daily to the Dangote refinery, expected to take place over the next two months. This amounts to a total of 24 million barrels of Nigerian crude supply between October and November 2024.
In related news, oil marketers expressed concerns about a lack of communication from NNPC and the Dangote refinery regarding reports that NNPC is no longer the sole off-taker of petrol produced by the Lagos-based refinery. Despite attempts by our correspondents to gather information, both NNPC and Dangote have not confirmed this claim.
As speculation circulated about NNPC stepping aside as the sole off-taker, some depots temporarily halted petrol sales, anticipating a potential price increase. However, this hike did not materialize, and the depots resumed operations after a brief pause.
Additionally, the Independent Petroleum Marketers Association of Nigeria (IPMAN) announced that the NNPC portal for purchasing petrol has been reopened to its members, who had previously been shut out from accessing products.
Sources indicated that the naira-for-crude deal, while promising, is intended to last for only six months initially. An anonymous source from the Dangote refinery emphasized that many Nigerians are enthusiastic about the government’s agreement but may not realize the limited timeframe of the deal.
The Federal Government had previously announced the commencement of crude oil and refined product sales in naira, effective October 1, 2024. This initiative aims to reduce pressure on the naira, eliminate unnecessary transaction costs, and enhance the availability of petroleum products across Nigeria.
Although the naira-for-crude initiative is designed to address current challenges, sources within the Dangote refinery cautioned that it is not a permanent solution, as crude oil transactions are inherently dollar-based.
In addition, the growing reliance on local crude supply is expected to impact Nigeria’s crude oil exports significantly. Analysts predict that this shift will tighten the West African crude market, particularly in the fourth quarter, as the Dangote refinery increases its local feedstock intake.
While the uncertainty surrounding the NNPC’s role as a petrol off-taker continues, IPMAN is keen on securing direct purchasing agreements with the Dangote refinery, bypassing traditional channels. The association has expressed a strong desire to deal directly with the fuel producer, highlighting the potential for improved access and pricing for independent marketers.
As the situation evolves, stakeholders remain vigilant for updates on pricing and supply arrangements that will shape Nigeria’s oil landscape in the coming months.
