The Nigerian National Petroleum Company (NNPC) has ended its naira-for-crude deal with local refineries, including Dangote Petroleum Refinery. This decision could lead to higher petrol prices as refineries will now source crude oil from international markets, potentially impacting Nigeria's foreign exchange reserves and domestic fuel supply.
The Nigerian National Petroleum Company (NNPC) has decided to end its naira-for-crude agreement with local refineries, including Dangote Petroleum Refinery. This move is likely to drive up petrol prices as local refineries will now have to purchase crude oil from international markets, resulting in higher foreign currency costs.
According to sources, the NNPC has informed local refineries that it has already sold its entire crude oil supply for the next several years, making it impossible to continue supplying them under the previous agreement. While crude production in Nigeria has increased since the deal started in October 2024, it has not been enough to meet the needs of local refineries.
The naira-for-crude deal, which allowed refineries to purchase crude oil in naira instead of dollars, was introduced as a way to reduce the country's reliance on imported refined products and improve domestic fuel supply. However, the suspension of this agreement could lead to rising fuel prices as local refineries now turn to foreign suppliers, potentially impacting Nigeria’s foreign exchange reserves.
Despite efforts to enhance local refining capacity, Nigeria continues to spend billions of dollars on importing petrol and diesel. Industry sources estimate that the country spent over $4.3 billion on these imports in just five months. With the cancellation of this agreement, analysts are concerned about the consequences for Nigeria’s energy sector, including the potential for inflation and increased pressure on the naira.
