THERE appears to be uncertainty regarding the pricing of petroleum products in Nigeria as the Nigerian National Petroleum Company Limited (NNPCL) has stopped, with immediate effect, the sale of crude oil to local refiners, including Dangote Refinery, in Naira, as directed by the Federal Government last year.
Curiously, this comes even as Nigeria’s crude output has increased since the arrangement started.
The naira-for-crude arrangement, introduced on October 1 2024, allowed local refiners to purchase crude oil in naira instead of dollars. The initiative was designed to support domestic refining capacity, reduce reliance on imported petroleum products and stabilise the local currency by easing pressure on foreign exchange reserves.
There are fears that the action could drive up production costs and ultimately lead to spike in the current pump prices in the country.
The company had forward-sold all its crude, ostensibly to secure immediate funding, repay debts or fulfill contractual obligations, but it was gathered that it had stopped the arrangement, leaving local refineries to source crude in foreign currencies, especially the United States (UD) Dollar, thereby putting additional pressure on the Naira and possibly increasing production cost and ultimately resulting to increase in pump prices.
In industry parlance, ‘forward-sold all its crude’ means that the company has already sold future crude production in advance, possibly to secure immediate funding, repay debts or fulfil contractual obligations.
However, the NNPCL was yet to make any official statement on the development.
But in November last year, Dangote Refinery alleged that NNPCL was not keeping its own end of the bargain. Vice President of Dangote Industries Limited (DIL), Edwin Devakumar, said: “We need 650,000 barrels per day (bpd). NNPCL agreed to give a minimum of 385,000 bpd, but they are not even delivering that.”
While a source confirmed that NNPCL had informed Dangote Refinery and other local refiners of the development until 2030, the indigenous refinery told an online platform that the company would carefully evaluate its options before deciding what to do.
Apart from Dangote Refinery, others to be affected by the stoppage include Waltersmith Petroman, BUA Refinery and those expected to come on stream very soon.
