Victor EzejaEconomist and energy expert, Mr Kelvin Emmanuel, has highlighted why Dangote Refinery is right in suspending the sales of petroleum products in naira.
Mr Emmanuel said Dangote Refinery’s decision to stop sales of petroleum products in naira was a right decision because, according to him, the Nigerian government has failed to assure adequate supply of crude feedstock.
Join our WhatsApp ChannelPrime Business Africa had reported that the 650,000 barrels per day capacity refinery on Wednesday, announced temporary suspension of the sale of petroleum products in naira.
The firm said its sales of petroleum products in naira have already exceeded the value of naira-denominated crude it has received.
“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 avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in US dollars.
“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency,” the firm stated.
READ ALSO: Fueling Uncertainty: What Government’s Naira-for-Crude Policy Means For Nigeria
The Nigerian government had in October 2024, commenced implementation of Naira-for-crude policy, that obligated the Nigeria National Petroleum Company Limited (NNPCL), to supply crude oil to Dangote and other local refiners in naira. The aim was to reduce pressure on the naira in the foreign exchange market- as crude oil is denominated in dollars in the international market- and also make the cost of the refined products affordable to Nigerians. The deal, according to NNPCL was set to last for six month which ends by 31 March 2025.
However, there are indications that Dangote and other local refineries have not been getting adequate supply of crude feedstock forcing the company to resort to importation.
Immediately after Dangote Refinery’s announcement, the cost of loading petrol at private depots in Lagos jumped to about N900/litre, against less than N850/litre before the announcement.
Speaking in an interview on Arise News Morning Show, Emmanuel said since the Naira-for-crude policy started in October, NNPCL‘s supply to Dangote has been averaging around 110 to 120,000 barrels per day in local currency, but dropped to about 83,000 barrels per day in January, 61,000 barrels per day in February and stopped entirely in the middle of March.
He expressed concerns that after spending billions of dollars in the last eight years to build the refinery, Dangote is unable to get supply of crude oil locally, making it to import the product from outside Nigeria.
According to him, Dangote Refinery imported more than 6 million barrels of crude oil in February, and is landing nearly 10 million barrels in this month of March from outside Nigeria to refine. “How does it make sense that Nigeria, who is a major member of OPEC (Organisation of Petroleum Exporting Countries) and a major oil producing country, I think they are 12 or 13 largest producer in the world, has his major refiner importing crude oil from outside the country to refine,” Emmanuel asked.
He added that the refinery was also bending over backwards by selling below plats pricing system which is actually the the global benchmark for pricing PMS around the world.
This, he said wasn’t sustainable for a private business entity.
He further said the situation also reflects leadership failure on the part of regulatory authorities in the oil and gas sector such as the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). He alleged that NMDPRA does not have a laboratory for testing the quality of petroleum products brought into the country.
“NMDPRA does not have a lab to test the quality of product to be sure it meets up with the sulfur level, as it is stated in the PIA (Petroleum Industry Act).”
The PIA says in section 317(11), that every petrol that comes into Nigeria must meet up with the sulfur level of 50 parts per million.
He said while holding Dangote Refinery to a very high standard, how is the regulatory authorities ensuring that petroleum products imported into the country are tested to ensure they meet the minimum standard as specified in the PIA.
Reports have indicated that NNPCL has been unable to sustain the naira-for-crude deal between it and Dangote refinery because large volumes of it has been allocated to foreign creditors.
The energy expert said it is quite appaling that as one of the top largest crude oil producers in the world, in 2025, Nigeria’s local refiners like Dangote Refinery are unable to get domestic supply pushing it to import.
“It is quite absurd that in 2025 we are importing crude oil, refining petrol, and then he’s selling petrol in naira without an active or a liquid, forward market for him to be able to hedge, to prevent against volatility or risk of paying for dollar, selling in naira and having to go back to the market to buy dollar and import crude. It just doesn’t make any sense. “So the decision he made to suspend the sale of petrol in Naira is the right decision, because the government has refused to come to the table to tell him how they are going to provide crude oil, feedstock.
“It doesn’t make sense that the government is planning to raise $5.5 billion from Saudi Aramco, yes, in a forward sale agreement to finance obligations that it has and pledged Nigeria’s crude oil for the next nine years when it doesn’t have good feedstock to refine and provide to Nigeria.
Dangote should not carry the burden when the government is not willing to share risk,” he further stated.
Speaking on concerns about monopoly by Dangote Refinery, the energy expert queried why the NNPCL has not been able to produce petroleum products from its refineries such as Port Harcourt and Warri refineries which it claimed have resumed operations after billions of dollars were spend on rehabilitation and turn around maintenance over the years.
Meanwhile, marketers of petroleum products have hinted that they will explore other alternatives if the Dangote refinery insists it would no longer sell petrol in naira.
Nigerians have expressed concerns that the suspension of sales of petroleum products in naira by Dangote could lead to further hike in prices of fuel
“This decision to suspend fuel sales in Naira may push fuel prices higher and put more pressure on the Naira. If it is sold in dollars, the weight will still fall on citizens, leading to increased costs, inflation, and more economic hardship,” an X user, Andrew Mamedu, stated.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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