The Nigerian National Petroleum Company (NNPC) Limited has suspended the naira-for-crude oil swap arrangement with domestic refiners, including Dangote Refinery and other private operators.
The decision, which takes immediate effect, has sparked concerns over its potential impact on Nigeria’s energy sector and the economy at large.
Introduced on October 1, 2024, the naira-for-crude deal allowed local refiners to purchase crude oil in naira rather than in dollars. The initiative was designed to bolster domestic refining capacity, reduce dependence on imported petroleum products, and stabilise the local currency by easing demand for foreign exchange.
With the suspension of this agreement, Nigerian refineries—including the highly anticipated Dangote Refinery—must now procure crude oil from international suppliers, making payments in dollars. This shift is expected to drive up operational costs and, in turn, lead to a surge in fuel prices at the pump.
According to sources familiar with the development, NNPC informed local refiners that it has already committed its crude oil production to forward contracts, leaving no supply available for domestic refining. This revelation comes despite reports of increased crude output since the deal was first implemented.
The suspension has raised alarm among industry stakeholders, particularly for Dangote Refinery, which has relied heavily on locally sourced crude to sustain its operations. Analysts fear this move could delay the refinery’s production timeline and inflate costs.
Other private refiners, including Waltersmith Petroman and BUA Refinery, are also expected to bear the brunt of this decision. The naira-for-crude arrangement had provided them with a cost-effective means of securing crude oil, allowing them to compete with international suppliers.
Economists warn that this suspension could send shockwaves through the Nigerian economy. The naira has already been under significant pressure in recent months, and removing this dollar-saving mechanism could further weaken the currency.
Additionally, the move threatens Nigeria’s push for self-sufficiency in petroleum production—a critical goal of the federal government.
