Emmanuel OchayiDangote Refinery Receives Four Cargoes Under Naira-for-Crude Deal
The Dangote Petroleum Refinery has received four cargoes of crude oil from the Nigerian National Petroleum Company Limited (NNPCL) under the newly implemented naira-for-crude agreement. This development was confirmed by officials from both the refinery and the Federal Government on Tuesday.
Join our WhatsApp ChannelThe delivery of the crude, which was made within the last three weeks, marks the beginning of a significant shift in how crude is sold to local refineries. The Federal Government’s naira-for-crude sale initiative aims to ease foreign exchange pressures while ensuring a steady supply of fuel domestically.
A senior official from the refinery confirmed, “The naira-for-crude deal has officially started, and we have received four cargoes so far. We are expecting more in the coming weeks to continue refining operations.”
The source explained that the first phase of the agreement is scheduled to last six months, after which the Federal Government will decide whether to renew or terminate the arrangement.
The Naira-for-Crude Agreement: A New Direction
The naira-for-crude agreement was introduced in response to growing concerns over the high cost of crude oil in the international market. International Oil Companies (IOCs) had reportedly been charging a premium for Nigerian crude, complicating local refining efforts. In response, President Bola Tinubu proposed selling crude oil to local refineries in naira, effectively bypassing the dollar exchange rate and insulating the industry from currency fluctuations.
“The agreement is a game-changer,” noted a member of the Domestic Crude Supply Subcommittee. “It allows local refineries, like Dangote’s, to access crude more easily, avoiding the hurdles of international pricing.”
The Dangote Refinery, a $20 billion facility in Lekki, Lagos, is currently the only active petrol-producing refinery in Nigeria. This puts it in a crucial position under the naira-for-crude arrangement.
Overcoming Challenges in Crude Supply
Earlier this year, the Dangote Refinery faced challenges in securing crude from international suppliers, with allegations that some IOCs were attempting to sabotage the operation by prioritizing foreign buyers. Alhaji Aliko Dangote, President of Dangote Group, had previously raised concerns about the lack of local crude supply, emphasizing that some oil companies were selling to Asian markets at higher rates.
Mr. Devakumar Edwin, Vice President, Oil & Gas at Dangote Industries Limited, commented, “We faced significant difficulties earlier with IOCs insisting on higher premiums for crude. But with the naira-for-crude agreement, we are now in a better position to secure the crude we need for refining.”
He added, “If the Domestic Crude Supply Obligation guidelines are followed properly, we will be able to obtain crude oil directly from Nigerian producers without involving international intermediaries.”
Impact on Local Fuel Supply
With the four crude cargoes received so far, the refinery is expected to ramp up production of Premium Motor Spirit (PMS), diesel, and aviation fuel. These products will be sold to marketers in naira, further stabilizing the domestic fuel market.
Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed optimism about the initiative. “It’s a good step. With Dangote receiving enough crude, we expect a steady supply of petroleum products, which should reduce the shortfalls we’ve been experiencing,” he said.
Ukadike also pointed out that the shortfall in PMS supply to NNPC and other marketers could soon be a thing of the past, thanks to the steady inflow of crude to the Dangote Refinery under the naira-for-crude agreement.
Effect on Fuel Prices and Imports
The naira-for-crude agreement is also expected to impact fuel pricing. Local analysts predict that if crude continues to be sold to refineries in naira, it could drive down the cost of PMS. This would be a welcome development for Nigerians who have faced high fuel prices in recent months.
READ ALSO: Naira-for-Crude Deal To Last Six Months As Dangote Refinery Receives 400,000 Barrels Of Oil Daily
“Our fuel prices will be determined by demand and supply,” Ukadike explained. “Once the supply stabilizes, prices will likely drop. The naira-for-crude deal will ensure a more predictable supply chain for fuel.”
The agreement has already led to a reduction in petrol imports. According to S&P Global Commodity Insights, petrol shipments to Nigeria fell sharply in early October as the domestic supply from Dangote Refinery increased. Data from the first two weeks of October showed a significant decline in petrol imports, suggesting that the refinery’s production capacity is already making a difference.
More Cargoes Expected Soon
Government officials have confirmed that more crude cargoes will be delivered to Dangote Refinery in the coming weeks. The refinery is expected to receive about 385,000 barrels per day under the naira-for-crude deal, a significant increase that will ensure its ability to meet domestic demand.
Although the Federal Government has not yet confirmed the exchange rate for this transaction, industry experts suggest it may be fixed at around N1,000 per dollar for the duration of the six-month agreement.
As the naira-for-crude deal continues, the success of this initiative will be closely watched. If it proves effective, it could be expanded to include other refineries that are set to come online in the near future.
Looking Ahead
While the Dangote Refinery has already received four crude cargoes, industry stakeholders are optimistic that this is only the beginning.
With the Federal Government’s support and a steady crude supply, the refinery is poised to play a pivotal role in Nigeria’s energy landscape.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
