The Nigerian National Petroleum Company Limited (NNPCL) has initiated discussions with the Dangote Petroleum Refinery regarding the renewal of the naira-for-crude agreement.
The initial deal, set to expire on March 31, 2025, is under review for possible extension, ensuring continued domestic crude supply to the privately owned refinery.
This development follows speculations that NNPCL had suspended the naira-for-crude arrangement until 2030, with claims that the national oil firm had forward-sold all its crude oil.
However, NNPCL, in an official statement released on Monday, clarified that the contract was initially structured as a six-month agreement, subject to crude availability, and discussions are underway to establish a new contract.
Background of the Naira-for-Crude Policy
The naira-for-crude deal was introduced by the federal government on October 1, 2024, as a strategy to support local refining, reduce reliance on imported petroleum products, and ease pressure on the country’s foreign exchange reserves.
Under the policy, crude oil was allocated to domestic refineries, including the 650,000 barrels per day (bpd) capacity Dangote Refinery, which had received about 48 million barrels between October and December 2024.
According to the NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, the refinery has been allocated a total of 84 million barrels since it commenced operations in 2023.
He reiterated that the national oil company remains committed to supplying crude to local refineries based on mutually agreed terms and conditions.
Policy Continuity and Government Assurance
Zacch Adedeji, Chairman of the Technical Sub-Committee on the naira-for-crude deal, reaffirmed that the policy remains intact, dismissing claims of its discontinuation.
He emphasized that evidence supports its positive impact on the economy, stating:
“The policy framework enabling the sale of crude oil in naira for domestic refining remains in force. The initiative was designed to ensure supply stability and optimize the utilization of local refining capacity. There has been no decision at the policy level to discontinue this approach, nor is it being considered.”
Adedeji further noted that the Nigerian Upstream Petroleum Regulatory Commission is ensuring compliance with the Domestic Crude Oil Obligations provisions of the Petroleum Industry Act (PIA), ensuring that modular and other refineries are not sidelined in the allocation of crude oil.
Calls for Inclusion of Modular Refineries
Amid the negotiations for a renewed deal with Dangote Refinery, the Crude Oil Refinery Owners Association of Nigeria (CORAN) has urged the government to extend similar agreements to modular refineries. Eche Idoko, the association’s Publicity Secretary, emphasized that the government initially assured them that modular refineries, with a collective demand of 27,000 barrels per day, would be included in the second phase of the naira-for-crude policy.
“The reason the government started with Dangote was because they needed a refinery that could produce petrol, and at the time, only Dangote had that capacity. However, diesel is also critical for our economy, as it fuels trucks transporting food and other essentials. We hope that modular refineries will be included in the next phase of this initiative.”
Idoko highlighted the successes of the policy, citing reductions in refined product prices and improvements in the naira’s value against the dollar as key benefits.
He insisted that the government should honor its initial commitment to broader industry participation.
Financial Overview and Transaction Details
An analysis of crude oil liftings from NNPCL’s reports at the Federal Account Allocation Committee (FAAC) meetings revealed that Dangote Refinery received crude oil worth approximately N486.31 billion between October and December 2024.
Transactions were valued at $373.76 million, payable in naira at an Afrexim Bank-advised exchange rate.
Despite these transactions, documents indicate that Dangote Refinery had outstanding obligations totaling $126.99 million (approximately N199.96 billion) as of February 2025, pending remittance to NNPCL.
The agreement, structured as a credit facility, allows payment within 45 days of crude lifting.
Crude Supply Trends and Allocation Variations
A review of crude supply patterns to Dangote Refinery revealed fluctuating allocations. On October 14, 2024, the refinery received its highest allocation of 598,125 barrels, while its lowest supply, 5,000 barrels, was recorded on October 30, 2024.
In November, only two transactions were processed, supplying 798,374 barrels at an exchange rate of N1,666 per dollar, amounting to N100.87 billion. In December, crude supply resumed at a higher rate, with 799,737 barrels delivered on December 2, priced at $74.87 per barrel, with a total naira value of N93.59 billion.
Looking Ahead
As discussions for a new contract progress, industry stakeholders remain optimistic that the naira-for-crude policy will continue to enhance local refining, stabilize fuel supply, and support the national economy.
However, calls for inclusivity of other refineries highlight the need for a more comprehensive approach in the government’s refining policy.
The success of the renewed agreement will depend on its ability to balance supply efficiency, price competitiveness, and equitable access for all stakeholders in the sector.
