Concerns are mounting over the potential disruption of petrol supply in Nigeria, as the naira-for-crude oil deal between the Nigerian National Petroleum Company (NNPC) Limited and Dangote Refinery faces delay.
The agreement, which aimed to allow domestic refiners, including Dangote, to purchase crude oil in naira rather than US dollars, is reportedly stalling, raising fears of potential supply shortages.
According to a report by TheCable, the refinery, which can refine 650,000 barrels per day, has been unable to access crude oil from local producers.
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This is largely due to the failure of the NNPC to fulfil its part of the crude oil swap agreement, which was designed to provide the refinery with a steady supply of crude oil in exchange for refined petroleum products.
On March 13, BusinessDay reported Dangote Refinery, Africa’s largest oil refinery, is reportedly considering increasing its crude oil imports from Angola and Algeria as discussions continue over the naira-for-crude arrangement with the Nigerian government.
Bloomberg data show Dangote refinery has taken delivery of more than three million barrels of American crude since the start of the month.
The refinery has also purchased closer home, importing a shipment of Angola’s Pazflor grade and a cargo of Algeria’s Saharan Blend from Glencore Plc in recent weeks.
According to analysts at Energy Aspects Ltd., crude deliveries to the Dangote refinery have averaged 450,000 barrels per day in the past two weeks, up from an estimated 380,000 barrels per day in January and February.
The Naira-for-Crude Deal: A Stalled Agreement
The naira-for-crude deal, initiated by the federal government, was intended to ensure that domestic refineries, including Dangote’s, receive a consistent supply of crude oil.
Under the arrangement, the NNPCL was expected to supply crude oil to Dangote Refinery in exchange for refined products, which would then be distributed across the country to stabilise the fuel market.
However, the deal has reportedly stalled as sources said “the refinery will continue to load for export as it currently sources all its crude stock from the international market in dollars”.
Implications for Nigeria’s Fuel Supply
If Dangote Refinery halts petrol supply, it could exacerbate Nigeria’s already fragile fuel supply chain. The country has long relied on imported petroleum products to meet its energy needs, despite being Africa’s largest oil producer.
The Dangote refinery, which began processing crude into diesel, naphtha and jet fuel in January last year and petrol in September, said its output is sufficient to meet domestic demand.
The Dangote Refinery, which began operations last year, was seen as a game-changer for Nigeria’s energy sector, promising to reduce the country’s dependence on fuel imports and stabilise prices.
A halt in supply from the refinery could lead to fuel shortages and price hikes, further burdening Nigerian consumers and businesses already grappling with high inflation and economic challenges.
Read also: NNPC suspends naira-for-crude deal for Dangote, others
No response from Dangote yet
While Dangote Industries has yet to issue an official statement on the matter. Efforts to get Sunday Esan, senior general manager, corporate communications at Dangote Group proved abortive at the time of filling this report.
Industry sources suggest that the refinery is exploring alternative crude oil supply options, including imports.
Industry experts have called on the federal government and the NNPC to urgently resolve the issues delaying the naira-for-crude deal.
They argue that ensuring a steady supply of crude oil to domestic refineries is critical to achieving energy security and reducing Nigeria’s reliance on imported fuel.
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