Emmanuel OchayiThe decision of the Federal Government (FG) to halt the supply of crude oil to the Dangote Refinery in naira has caused concerns among petroleum marketers, who now fear a potential hike in fuel prices. With the suspension of the Naira-for-crude arrangement, private depot owners have already increased prices, while independent marketers are stockpiling petrol in anticipation of further hikes.
Marketers React to Suspension of Naira-for-Crude Deal
Following the Dangote Petroleum Refinery’s suspension of petroleum product sales in naira, several filling stations have started hoarding Premium Motor Spirit (PMS). Many retailers expect that fuel prices will rise as a result of the halted crude supply in local currency. However, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has warned against panic buying, stating that it could lead to heavy financial losses if prices drop unexpectedly.
Join our WhatsApp ChannelLast week, Dangote Refinery confirmed that it had stopped selling fuel in naira due to a mismatch between its crude procurement costs, which are denominated in US dollars, and its local sales revenue.
“We have temporarily halted the sale of petroleum products in naira to avoid a mismatch between our sales proceeds and crude oil purchase obligations,” the refinery announced.
READ ALSO: Petrol Imports Rise To 154m Litres Weekly As Naira-for-Crude Crisis Persists
Price Speculations and Depot Owners’ Profit Gains
The halt in naira crude sales has triggered speculation across the petroleum sector. Since the announcement, private depot owners in Lagos have raised loading prices for petrol to about N900 per litre, up from less than N850. Industry experts say the government’s silence on the matter has worsened uncertainty, leaving marketers unsure of how to proceed.
IPMAN’s National Publicity Secretary, Chinedu Ukadike, accused depot owners of exploiting the situation by raising prices, describing it as an economic sabotage.
“Some depot owners are already increasing the price, but we are asking our marketers not to panic-buy. When Dangote resumes sales in naira, there may be a price reduction, leading to losses for those hoarding fuel,” he warned.
He advised marketers to avoid buying excessive stock at inflated rates, stressing that they could face financial difficulties if the price eventually drops.
FG and Dangote in Talks to Revive Naira-for-Crude Deal
The Federal Government and Dangote Refinery are reportedly in discussions to resolve the disagreement and restore the Naira-for-crude arrangement. Sources within the petroleum industry have disclosed that the Technical Sub-Committee on the Naira-for-crude Policy is expected to review new options to address the issue.
A source from the Nigerian Upstream Petroleum Regulatory Commission revealed that the transaction would not be stopped permanently. The source, who spoke anonymously, stated that the Nigerian National Petroleum Company Limited (NNPCL) had crude supply challenges due to prior financial commitments.
“The NNPC has sold significant portions of its future crude production to secure loans from international financial institutions. This has limited its ability to meet local supply demands,” the source explained.
Concerns Over Forex Pressure and Fuel Importation
The halt in the naira-for-crude deal is expected to increase pressure on the foreign exchange market, as marketers will now have to source dollars for transactions with Dangote Refinery. The National Vice President of IPMAN, Hammed Fashola, cautioned that the naira might depreciate further due to increased demand for dollars by oil dealers.
Experts have stated that the previous naira-for-crude deal had enabled Dangote Refinery to stabilise fuel prices by forcing NNPCL to lower its rates. With its suspension, there are fears that petrol prices could skyrocket if alternative measures are not introduced soon.
Possible Impact on Fuel Supply and Market Stability
Industry sources suggest that stopping the naira-for-crude agreement might be an attempt to reduce Dangote Refinery’s dominance in the market. Some stakeholders believe certain players in the sector want to maintain fuel importation instead of supporting local refining.
Reacting to this, the National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria, Eche Idoko, said suspending the deal undermines efforts to achieve energy security.
“The halt of crude oil sales in naira is a deliberate move to frustrate the Dangote Refinery and return Nigeria to full reliance on imported fuel. This is a setback for the industry,” Idoko said.
FG’s Next Move and the Future of Fuel Prices
The Federal Government has reportedly initiated fresh negotiations with Dangote Refinery over the renewal of the Naira-for-crude deal. According to NNPCL spokesman, Olufemi Soneye, discussions are ongoing as the first phase of the agreement, which started in October 2024, is set to expire this month.
Since October, 48 million barrels of crude have been supplied to Dangote Refinery under the naira-for-crude deal. However, with the current disagreement, there are concerns that petrol marketers may face challenges in accessing affordable fuel, leading to higher pump prices.
As negotiations continue, industry players are closely monitoring developments. If a resolution is not reached soon, the instability in the petroleum sector may persist, potentially leading to fuel shortages and increased transportation costs across Nigeria.
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.
