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Dangote Petroleum Refinery has announced a temporary halt in the sale of petroleum products in naira, citing an imbalance between its sales proceeds and crude oil purchase obligations denominated in dollars.

The suspension of naira petrol sales is expected to fuel a surge in demand for the US dollar in Nigeria’s foreign exchange market amid delays in the renegotiation of the naira-for-crude deal.

According to sources, the refinery, which can refine 650,000 barrels per day, has been unable to access crude oil from local producers.

This is largely due to the failure of the Nigerian National Petroleum Company Limited (NNPCL) to fulfil its part of the crude oil swap agreement, which was designed to provide the refinery with a steady supply of crude oil in exchange for refined petroleum products.

Why Dangote suspended naira petrol sale

In the statement entitled, ‘Temporary Suspension of Sales of Petroleum Products in Naira,’ the management of Dangote Petroleum Refinery explained that the decision was necessary to align its sales currency with the crude procurement currency.

“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 statement read.

The refinery also dismissed reports circulating online claiming that the suspension was due to an incident of ticketing fraud.

Describing the claims as ‘malicious falsehood,’ the management emphasised that its systems remain robust and no fraud issues have been encountered.

The firm, however, assured that sales would resume in naira as soon as it receives crude supply in naira from the NNPC Limited.

“Our attention has also been drawn to reports on the internet claiming that we are stopping loading due to an incident of ticketing fraud,” Dangote refinery said.

“This is a malicious falsehood. Our systems are robust and we have had no fraud issues”.

Read also: Dangote may halt petrol supply to Nigeria as naira-for-crude deal delays

Market reactions and dollar rush

The announcement is seen triggering a rush for dollars among petroleum marketers and other stakeholders, who now face the prospect of purchasing products in U.S. dollars.

Naira impact, petrol prices

Analysts have warned that Dangote’s reluctance to supply the Nigerian market could exacerbate fuel scarcity and increase dependence on imported refined products, undermining the country’s energy security goals.

With the deal now coming to an end, there are fears that if local refineries, including Dangote, are forced to source crude in dollars, production costs could rise significantly.

This shift could put additional pressure on the naira and ultimately lead to an increase in petrol pump prices.

The Central Bank of Nigeria (CBN) data showed that the naira dipped by 30 basis points on Tuesday, settling at N1,532.94/$ in the Nigerian Foreign Exchange Market (NFEM), compared to N1,528.03/$ on Monday.

The local currency closed at N1,590/$ in the parallel market, lower than its closing settlement price of N1,575/$ on Monday.

“If marketers are forced to buy products in dollars, the cost will inevitably be passed on to consumers, leading to higher petrol prices,” said Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies.

Marketers’ reactions

Abubakar Maigandi, president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), said its members are not happy with the new directive from the Dangote refinery.

“We call on the government and the NNPC to continue the sales of crude to the Dangote Refinery in Naira. Since the Naira -for-Crude sales commenced, we have seen a continuous reduction in the price of petrol as well as its availability across the country,” Maigandi said.

He added, “This decision of the company will pose another challenge for us as marketers and we appeal to the NNPC to continue sales of crude in Naira.”

Implications for Nigerian Market

The temporary halt in naira-denominated sales of petroleum products is expected to have significant implications for the Nigerian market.

While the Dangote refinery has assured customers that it remains committed to serving the Nigerian market efficiently and sustainably, the suspension could lead to increased pressure on the country’s fuel supply chain.

Nigeria, despite being Africa’s largest oil producer, has long relied on imported petroleum products to meet its energy needs.

On March 10, BusinessDay reported that the NNPC Limited had reportedly suspended the naira-for-crude deal until 2030, as the government-owned company has forward-sold all its crude oil.

However, following the report, the NNPC said negotiations were ongoing for a new naira-for-crude deal with Dangote Petroleum Refinery, as the current agreement would expire at the end of March.

Zaach Adedeji, chairman of the Naira-for-Crude Policy Technical Sub-Committee, reassured that the naira-based crude oil supply arrangement with local refineries has not been discontinued.