Dangote Petroleum Refinery has temporarily suspended the sale of petroleum products in Naira, opting instead for transactions in U.S. dollars.
This decision, detailed in a press release to its valued customers, comes as a direct response to the Nigerian National Petroleum Company (NNPC) Limited’s recent suspension of its Naira-for-crude oil deal with domestic refineries, including Dangote.
The $20 billion refinery, in Lagos, cited the need to align its sales currency with its crude oil procurement costs, which remain denominated in U.S. dollars, as the driving force behind this move.
Reason for the Suspension
The press release explained that the suspension was necessitated by a financial mismatch. “To date, our sales of petroleum products in Naira have exceeded the value of Naira-denominated crude we have received,” the statement read.
This imbalance arose after NNPC halted its Naira-for-crude agreement on March 10th forcing Dangote to procure crude oil in dollars from international/local suppliers. To avoid further losses, the refinery has adjusted its sales currency to match its procurement obligations.
The management emphasized that this is a temporary measure, with plans to resume Naira-based sales as soon as NNPC resumes supplying Naira-denominated crude cargoes.
Debunking Fraud Rumors
Addressing circulating rumors, Dangote Refinery firmly denied claims that the suspension stemmed from an incident of ticketing fraud. “Our attention has also been drawn to reports on the internet claiming that we are stopping loading due to an incident of ticketing fraud. This is malicious falsehood,” the statement clarified.
The refinery underscored the robustness of its systems, asserting that no fraud issues have occurred, and reaffirmed its commitment to operational integrity.
Despite the shift to dollar-based sales, Dangote Refinery reiterated its dedication to serving Nigeria efficiently and sustainably. “We remain committed to serving the Nigerian market,” the statement assured, expressing appreciation for customers’ understanding and cooperation.
Impact on The Naira and Foreign Exchange Reserves
Dangote refinery’s sale of petrol in dollars will exert pressure on the Naira, which has already faced slight volatility recently. The demand for U.S. dollars among marketers purchasing its petroleum products will rise. This heightened demand could further weaken the Naira, particularly as Nigeria grapples with dollar shortages, already depleting its FX reserves from $40 billion to $38 billion.
With Dangote and other refineries now sourcing crude oil internationally or locally in dollars following NNPC’s suspension of the Naira-for-crude deal the country’s FX reserves could face depletion. The Naira-for-crude initiative, aimed to ease pressure on reserves by reducing dollar outflows for crude purchases. Its termination, coupled with Dangote’s dollar-based sales, reverses these gains, as marketers source dollars to settle trade agreements.
NNPC’s decision to end the Naira-for-crude deal, which supplied Dangote with over 48 million barrels of crude since October 2024, has disrupted the policy designed to bolster domestic refining and reduce reliance on imported petroleum products.
Dangote’s suspension of Naira sales marks a shift in this policy, highlighting the fragility of Nigeria’s energy sector. While NNPC has hinted at ongoing discussions to renew the Naira-for-crude arrangement, the immediate fallout higher fuel costs, a weaker Naira, and strained FX reserves underscores the urgency of a resolution.
