Depot owners in Nigeria have expressed dissatisfaction with the Federal Government’s Naira-for-Crude oil arrangement, highlighting challenges in the current policy. The initiative, which began in October 2024, allows local refineries, including the Dangote Petroleum Refinery, to purchase crude oil in naira instead of the traditional US dollars.
Under this agreement, the Nigerian National Petroleum Company Limited (NNPCL) supplies up to 400,000 barrels of crude oil daily to the Dangote refinery. The policy aims to bolster local refining capacity and reduce dependence on imported petroleum products.
However, depot owners argue that the Naira-for-Crude deal has not led to the anticipated reduction in fuel prices. Despite the local sourcing of crude, the ex-depot price of petrol remains high, prompting the Independent Petroleum Marketers Association of Nigeria (IPMAN) to call for a price reduction. IPMAN suggests that the Dangote refinery should consider lowering its ex-depot price to reflect the benefits of domestic crude procurement.
Concerns have been raised about the quality of locally refined products. The Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA) refuted claims of importing substandard fuel, pointing out that diesel from the Dangote refinery contains higher sulphur levels than imported variants.
The NNPCL has addressed reports suggesting the termination of the Naira-for-Crude agreement with the Dangote refinery. In a statement, the NNPCL clarified that the initial six-month contract, set to expire at the end of March 2025, is currently under review, with discussions ongoing for potential renewal.
Depot owners also express skepticism regarding the involvement of international oil companies (IOCs) in the Naira-for-Crude arrangement. While the NNPCL commenced the deal with the Dangote refinery, plans to include IOCs have been met with caution from marketers, who are closely monitoring the situation as the March deadline approaches.
Furthermore, the Dangote refinery has faced challenges in securing the agreed crude volumes from the NNPCL. The refinery reported receiving insufficient crude supplies, hindering its ability to ramp up production and meet domestic fuel demands.
In response to these challenges, the Dangote refinery announced a temporary suspension of fuel sales in naira, citing a mismatch between sales in local currency and crude purchases in dollars. This move has raised concerns about potential increases in petrol prices and further depreciation of the naira, as local fuel traders may scramble for foreign exchange.
The Naira-for-Crude policy, while well-intentioned, has encountered several obstacles that have limited its effectiveness in achieving lower fuel prices and enhanced local refining capacity. Depot owners and industry stakeholders urge the government to reassess the policy framework, address supply chain issues, and ensure that the benefits of local crude procurement translate into tangible advantages for consumers.
