The halt in the Naira-for-Crude initiative by the Nigerian National Petroleum Company (NNPC) could create some complications in Nigeria energy sector, as the Dangote Refinery has not only halted sale of premium motor spirits otherwise known as petrol, but is now looking at the possibility of selling the product in Dollars.
- NNPC’s halt in the Naira-for-Crude exchange may complicate Nigeria’s energy sector.
- Dangote Refinery has temporarily stopped selling petrol in Naira and is considering selling in USD.
- The imbalance in sales proceeds and crude oil purchase obligations is the reason for the decision to sell petrol in foreign currency.
Recently, the Dangote Refinery spoke about the possibility of withholding petrol supply to the Nigerian market due to unresolved issues surrounding the Naira-for-Crude oil exchange deal.
However, the refinery also seems to be looking at the idea of continuing with sale of petrol in the West African country, but in USD.
An imbalance in sales proceeds compared to crude oil purchase obligations is the rationale for the refinery’s decision to sell petrol in the foreign currency.
This move, according to a report by BusinessDay, could possibly lead to a surge in demand for the US dollar in Nigeria’s foreign exchange market amid delays in the renegotiation of the naira-for-crude deal.
“We wish to inform you that Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in Naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in U.S. dollars,” a statement by the Dangote Refinery reads.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” it adds.
Via the statement, the factory also denied online rumors that the interruption in petrol sale was brought on by a ticketing fraud incident.
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The refinery went on to promise that sales will resume in Naira as soon as it had its supply of oil in Naira from NNPC Limited.
Effects of Dangote’s decision to sell petrol in Dollars
Petroleum marketers and other stakeholders are said to be in a rush for USD as a result of Dangote’s new decision, as they may now have to pay for goods in US dollars.
Experts have also warned that this new move could bring about another fuel scarcity saga, and potentially a hike in petrol price, which had been on a downward trajectory since late last year.
Fuel in Nigeria has gone from as high as N1,200 to N825, due to price cuts initiated by the Dangote Refinery, which also reverberated across the market forcing other players to also cut down prices.
These gains could be reversed if the NNPC refuses to continue its sale of crude to local refineries in Naira.
Naira-for-Crude initiative in Nigeria
The Nigerian National Petroleum Company (NNPC) Limited recently discontinued its Naira-for-Crude program, which involves selling crude to local refineries in the Nigerian currency.
The decision was based on the NNPC’s assertion that it had forward-sold all of its petroleum, despite the fact that production levels had increased since the agreement began nearly six months ago.
“Forward-sold all its crude” means that the Nigerian National Petroleum Company (NNPC) Limited has already sold future petroleum output ahead of schedule, maybe to satisfy contractual obligations, pay off debts, or gain immediate cash.
Olufemi Soneye, NNPC spokesperson, stated in a recent statement that the Dangote refinery has had access to 48 million barrels of crude oil since the naira-for-crude deal was signed in October 2024.
