The Dangote Petroleum Refinery has taken delivery of four cargoes of crude oil from the Nigerian National Petroleum Company Limited (NNPCL) under the recently introduced naira-for-crude agreement. Officials from both the refinery and the Federal Government confirmed the development on Tuesday.
The deliveries, which occurred over the past three weeks, mark the start of the government’s initiative to supply crude to domestic refineries in local currency. Sources familiar with the arrangement disclosed that more shipments are expected in the coming weeks to support the refinery’s operations.
“The Dangote refinery has so far received four cargoes, and more deliveries will follow,” a source from the Technical Subcommittee on Domestic Sale of Crude Oil in Local Currency revealed. Preferring anonymity, the source stated that the $20 billion refinery, located in Lekki, Lagos, will soon begin the direct sale of refined products such as Premium Motor Spirit (PMS) to local distributors.
Confirming the agreement’s timeline, a senior official at the refinery added, “This first phase of the naira-for-crude programme is scheduled to last six months, after which the Federal Government will decide whether to renew it. For now, we cannot confirm the exact cost per barrel under this deal.”
The 650,000-barrel-per-day refinery initially encountered challenges securing crude, with Dangote Group President, Aliko Dangote, alleging sabotage by international oil companies (IOCs) that preferred to sell crude through their foreign intermediaries. According to the company, the IOCs also prioritized sales to Asian markets, further complicating local crude procurement.
Despite interventions from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in July, the refinery maintained that the IOCs continued to impede access to Nigerian crude. Mr. Devakumar Edwin, Vice President of Oil & Gas at Dangote Industries, had previously stated:
“If the Domestic Crude Supply Obligation guidelines are properly enforced, we should be able to procure crude directly from local producers as outlined in the Petroleum Industry Act.”
Edwin emphasized that IOCs demanded high premiums for crude, saying, “In April, we paid $96.23 per barrel for Bonga crude—this included a $5.08 NNPC premium and a $1 trader premium. Meanwhile, comparable WTI crude was available at a much lower premium.”
In response to these challenges, President Bola Tinubu proposed selling crude to domestic refineries in naira during a Federal Executive Council (FEC) meeting on July 29. FEC approved the plan to allocate 450,000 barrels per day for local consumption, with the Dangote refinery serving as the pilot facility.
A presidential aide, Bayo Onanuga, noted that an exchange rate would be fixed for the duration of the transactions, though details on whether the current exchange rate has been finalized remain unclear.
Industry operators believe that pegging the naira-dollar exchange rate at N1,000 per dollar, instead of N1,600, could help stabilize fuel prices. The implementation committee overseeing the naira-for-crude agreement confirmed that the sale officially commenced on October 1, with plans to supply 385,000 barrels of crude daily to the Dangote refinery.
Based on these projections, the refinery is expected to release corresponding volumes of refined products—such as petrol, diesel, and aviation fuel—into the domestic market, all sold in naira.
Marketers Express Optimism
Speaking on the development, Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), said that the crude supply to Dangote will alleviate the shortages previously reported by NNPCL and marketers.
“It’s a positive step that Dangote is getting adequate crude supply for refining. With four cargoes already delivered, PMS and other by-products should become more available. This will help resolve complaints of product shortages,” Ukadike noted.
On fuel pricing, Ukadike suggested that market dynamics would determine future prices: “Let the forces of demand and supply play out. Eventually, we should expect prices to drop instead of continually rising.”
With the first cargoes delivered, the refinery is now poised to sell refined products such as petrol and diesel directly to marketers in naira, marking a significant step in Nigeria’s efforts to reduce dependence on foreign refined fuel imports.
(PUNCH)
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