Crude Supply Dispute: Dangote Refinery, NNPC Clash Sparks Fuel Price Hike Fears

Following this announcement on Wednesday, the cost of loading petrol at private depots in Lagos surged to ₦900 per litre, up from less than ₦850 per litre before the news broke. Industry experts and oil marketers warn that this decision could intensify pressure on the foreign exchange market, as dealers will now require large amounts of U.S. dollars to purchase petroleum products.

Multiple industry insiders attributed the failure of the naira-for-crude talks to NNPCL’s extensive forward sales of crude oil. According to reports by The PUNCH, these sources revealed that NNPCL had already committed significant volumes of unproduced crude oil to secure loans from international financial institutions, leaving insufficient supply for the domestic market.

In a statement released on Wednesday, the Dangote Group clarified that the suspension of naira sales was temporary.

The statement read:
“Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to prevent a mismatch between our sales revenue and crude oil purchase obligations, which are currently denominated in U.S. dollars. So far, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. Therefore, we must temporarily align our sales currency with our crude procurement currency.”

Additionally, the refinery dismissed online reports suggesting that the halt was due to an incident of ticketing fraud. “This is a baseless and malicious falsehood. Our systems are robust, and we have had no fraud issues. We remain committed to efficiently serving the Nigerian market. Once we receive naira-denominated crude cargo allocations from NNPC, we will immediately resume selling petroleum products in naira,” the statement added.

Reacting to the development, a major oil marketer, speaking anonymously, noted two critical factors at play:

1. Nigeria generates over 90 percent of its foreign exchange revenue from crude oil sales.
2. The country has struggled to consistently produce beyond 1.6 million barrels per day, with much of that already committed to forward sales to ease cash flow constraints due to NNPCL absorbing fuel subsidy costs.

“Given these realities, the sustainability of the naira-for-crude arrangement was always in question,” the marketer stated, hinting at the possible collapse of the deal between Dangote Refinery and NNPCL.

NNPCL spokesperson Olufemi Soneye, when asked about the situation, neither confirmed nor denied the suspension of the naira-for-crude agreement. However, The PUNCH reported that discussions between Dangote Refinery and the Technical Sub-Committee on the deal had broken down due to crude supply shortages.

Soneye reiterated NNPCL’s commitment to supplying crude for local refining under agreed terms, stating:
“As I have repeatedly said, NNPC remains dedicated to supplying crude for domestic refining under mutually agreed conditions. Moreover, the NUPRC has disclosed that all local refining companies combined produce less than 50 percent of our national fuel consumption. You can do the math.”

Last week, NNPCL initiated new negotiations with Dangote Refinery to renew the naira-for-crude agreement ahead of the expiration of the first phase, which began in October 2024 and concludes this month. Soneye disclosed that NNPCL had supplied 48 million barrels of crude to Dangote Refinery since October.

With the suspension of naira sales, marketers will now have to source U.S. dollars to purchase petrol from Dangote Refinery. This has sparked concerns over a potential depreciation of the naira. The National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Hammed Fashola, commented:
“Petrol prices depend on exchange rates, crude prices, and other factors that determine the landing cost. The recent landing cost stood at ₦774.82 per litre. If that remains stable, Dangote’s decision may not immediately impact prices. However, if marketers scramble for dollars to buy petrol, the naira could weaken further. We must wait and observe market reactions to this development.”

Fashola also urged the Federal Government to reconsider its agreement with Dangote to stabilize fuel prices.
“The masses have enjoyed recent price reductions, but within hours of Dangote’s announcement, private depot owners have started increasing prices. We closed yesterday at ₦825–₦826 per litre, but by this afternoon, prices rose to ₦835–₦836. I appeal to the FG to ensure continued crude supply to Dangote and other local refiners to maintain price stability.”

The National President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, echoed these concerns, warning that the halt in naira sales could lead to price hikes.

He also noted that the Federal Government has yet to officially confirm a decision on discontinuing the naira-for-crude deal.
“No official decision has been made yet. So, I’m not sure where Dangote’s announcement is coming from. However, as a businessman, he is free to speculate and make strategic decisions,” Gillis-Harry remarked.

The naira-for-crude arrangement had allowed Dangote Refinery to repeatedly reduce petrol prices, compelling NNPC to follow suit, despite the impact on its profit margins.

Industry sources speculate that ending the deal could be an attempt to curb Dangote Refinery’s market dominance. Some believe this move could facilitate a return to full-scale fuel importation.

On Tuesday, Finance Minister Wale Edun met with Aliko Dangote to discuss concerns surrounding the naira-for-crude deal. Domestic refiners have criticized the suspension, alleging it was orchestrated to stifle Dangote Refinery while encouraging fuel imports.

Eche Idoko, the National Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), argued:
“During negotiations, the government sidelined CORAN, leaving us in the dark about the terms of the agreement. If this deal collapses, we risk reverting to full-scale importation, which will weaken the naira and drive up fuel prices. The government should consider the long-term benefits rather than focusing solely on Dangote’s gains.”

Chinedu Ukadike, IPMAN’s National PRO, warned that the suspension would likely lead to higher pump prices due to the increased cost of sourcing forex.
“Dangote has been struggling to secure dollars for crude purchases, meaning marketers will now have to pay in dollars. Ultimately, these costs will be passed down to consumers. So, brace yourself for price hikes,” he cautioned.

Following the uncertainty, private depot owners have raised their petrol loading costs, with several major depots—including Bovas, Aipec, Menj, and Integrated—halting sales altogether.

Olatide Jeremiah, CEO of petroleumprice.ng, warned that if a resolution is not reached soon, loading costs could surge to ₦1,000 per litre.
“This abrupt price increase and halt in private depot sales following Dangote’s announcement solidify the refinery’s role as the market leader in Nigeria’s downstream sector. I urge NNPCL and NUPRC to enforce Section 109 of the Petroleum Industry Act (PIA), which mandates that local refineries must have unrestricted access to crude,” he said.

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