Market News

BY  Adekunle Agbetiloye

Nigerians may soon experience another surge in petrol prices as the Nigerian National Petroleum Company (NNPC) Limited has reportedly halted its naira-for-crude deal with local refineries.

• NNPC has halted its naira-for-crude deal with local refineries.
• This move could drive up production costs and ultimately lead to an increase in petrol pump prices for Nigerians.
• NNPC has forward-sold all its crude, possibly to secure immediate funding, repay debts, or fulfill contractual obligations.

Nigerians may soon experience another surge in petrol prices as the Nigerian National Petroleum Company (NNPC) Limited has reportedly halted its naira-for-crude deal with local refineries.

Sources reveal that NNPC has stopped the arrangement, leaving local refineries, including Dangote to source crude in dollars, a move that could drive up production costs, put additional pressure on the naira, and lead to an increase in petrol pump prices.

According to TheCable, NNPC informed refineries that it had forward-sold all its crude, despite current production levels being higher than when the deal began about six months ago.

What does this mean?

"Forward-sold all its crude" means that the Nigerian National Petroleum Company (NNPC) Limited has already sold future crude production in advance, possibly to secure immediate funding, repay debts, or fulfil contractual obligations.

For example, in August 2023, NNPC secured a $3.3 billion emergency loan from Afreximbank to help stabilize Nigeria’s foreign exchange market. This loan was structured as a crude-for-cash arrangement, meaning Nigeria committed to repaying the loan using future crude oil sales.

While NNPC has not made an official statement on the recent development, multiple sources told TheCable that the initiative, which began on October 1, 2024, will remain suspended until 2030.

Crude supply crisis

At the inception of the crude-for-naira deal, Dangote Refinery was selected as a pilot beneficiary, receiving at least four cargoes of crude oil from the NNPC in October.

However, the crude-for-naira deal has hit some roadblocks. By November 2024, Dangote Refinery revealed NNPC was not holding up its end of the bargain.

“We need 650,000 barrels per day, (state oil firm NNPC Ltd) agreed to give a minimum of 385,000 bpd but they are not even delivering that,” Edwin Devakumar, the vice-president of Dangote Industries Limited (DIL) had said.

A high-level source confirmed that NNPC has informed Dangote Petroleum Refinery and other local refiners that it will no longer supply them with crude oil, as all its crude has been forward-sold until 2030.

While the Dangote Refinery has not officially commented on NNPC’s decision, an official stated that the company will carefully evaluate its options before determining its next course of action.