The Dangote Petroleum Refinery, alongside several modular refineries in Nigeria, could be set to spend approximately $1.43 billion monthly — a staggering $8.56 billion over the next six months — on the importation of crude oil to maintain operations.
The news comes as concerns mount over the future of the controversial “naira-for-crude” policy, which has left the domestic refining sector in turmoil.
With a refining capacity of 650,000 barrels per day, the Dangote refinery, one of the largest of its kind in Africa, along with other local refineries like the Edo Refinery, has been caught in the crossfire of an evolving economic and political situation.
These refiners now face the possibility of importing all their crude, a shift that could have significant implications for Nigeria’s oil economy and its international financial commitments.
A Hefty Price Tag on Crude Imports
The combined crude oil requirements of the Dangote and Edo refineries are projected to hit 680,000 barrels per day, translating to 20.4 million barrels per month, or approximately 122.4 million barrels over a six-month period. At the current Brent crude price of $70 per barrel, the cost of sourcing this crude could run up to $8.56 billion in just half a year — an unsustainable expenditure for many.
These costs are exacerbated by the mounting uncertainty over Nigeria’s “naira-for-crude” arrangement, which has historically allowed refineries to source crude in exchange for payment in local currency. However, a breakdown in negotiations between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote refinery has thrown this deal into jeopardy.
Suspended Naira-for-Crude Deal
In a significant blow to the local refining industry, an anticipated meeting between the Technical Sub-Committee on the Naira-for-Crude Policy, Dangote refinery, and government officials was abruptly canceled this week. According to insider sources, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) was unable to present the necessary options to resolve the issue, further delaying the implementation of a revised agreement. The meeting, initially scheduled for Monday, has now been rescheduled, with officials hoping to reconvene before the Sallah holiday.
A senior government source, who spoke on condition of anonymity, suggested that the delay was due to the NUPRC’s inability to finalize critical proposals required by the committee. As it stands, Dangote and other domestic refineries are left with no choice but to turn to foreign suppliers to meet their crude oil demands.
Crude Supply Crisis Deepens
The dilemma facing Nigeria’s domestic refineries is rooted in the failure of the Federal Government to fulfill its Domestic Crude Supply Obligation (DCSO). This program, designed to allocate crude oil to local refineries, has faced increasing challenges in recent months due to Nigeria’s commitment to honor foreign loans through oil-backed agreements.
These arrangements have diverted large volumes of crude oil to international creditors, leaving the local refining sector struggling to secure the necessary feedstock.
In a recent interview, Eche Idoko, National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria (CORAN), expressed frustration at the government’s failure to allocate sufficient crude to local refineries.
He noted that many modular refineries, unable to operate without adequate crude supplies, have been dormant for months. The Edo refinery, which has been in talks with a U.S.-based crude supplier to secure an offtake deal, is among the few that are attempting to diversify their crude sources.
Idoko further criticized the government for undermining efforts to stabilize the sector, warning that the treatment of domestic investors in local refining could have serious political consequences ahead of the 2027 elections.
The Economic Fallout
As Nigerian refiners are left to import crude, the consequences for the local economy could be far-reaching. In addition to the financial burden of crude imports, domestic refiners face the looming threat of higher petrol prices. Already, private depot owners in Lagos State have raised loading costs for refined products, and retail fuel stations across the Federal Capital Territory have followed suit, hiking petrol prices by up to 4.67% on Monday.
These price increases are expected to exacerbate the already volatile cost of living in Nigeria, with the national economy grappling with the fallout from the suspension of the naira-for-crude deal and the uncertainty surrounding the sustainability of local refining.
Dangote’s Temporary Halt on Naira Sales
In response to the mounting crisis, the Dangote Petroleum Refinery announced a temporary suspension of its naira-denominated petroleum product sales. The refinery explained that it had encountered an imbalance between its sales proceeds in naira and the crude oil purchase obligations, which are denominated in U.S. dollars. This decision underscores the growing financial challenges faced by the refinery, which has already resorted to importing significant quantities of crude oil to maintain its operations.
Since the announcement, Dangote refinery has imported more than 650,000 metric tonnes of crude oil in just three days.
This rapid shift highlights the refinery’s reliance on foreign crude to meet its refining needs, further underscoring the gap left by the collapse of the naira-for-crude arrangement.
What’s Next for Nigeria’s Refining Sector?
With the continued uncertainty surrounding crude oil supply, Nigerian refineries may face even greater challenges in the coming months.
The failure to resolve the ongoing issues around the naira-for-crude deal could lead to further imports of crude, higher petrol prices, and potentially more unrest in the sector.
Stakeholders and industry observers are urging the Nigerian government to take swift action to stabilize the refining landscape, particularly as elections approach.
For now, the future of Nigeria’s domestic refineries remains uncertain, with key players like the Dangote refinery being forced to turn to international markets to keep their operations afloat.
Whether the government can step in to broker a resolution will be crucial in determining the trajectory of the nation’s oil refining industry — and the broader economic impact on Nigeria’s struggling citizens.
