Petrol Prices Soar as Naira-for-Crude Deal Expires Today

Nigeria’s oil and gas industry is on edge as the naira-for-crude deal between the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote Petroleum Refinery nears its expiration today, Monday, March 31, 2024. Launched on October 1, 2024, this six-month agreement allowed the refinery to buy crude oil in naira rather than US dollars, aiming to boost local supply, cut import costs, and ease petrol prices. However, with no clear decision on its renewal, pump prices have spiked, and stakeholders fear worst is to come.

The naira-for-crude arrangement, under which NNPCL supplied 48 million barrels of crude to the Dangote refinery in naira, part of a total 84 million barrels since 2023 promised stability.

Yet, talks to extend it have faltered. NNPC had earlier stated that it had forward sold $21 billion of crude. A senior finance ministry official confirmed that the negotiation committee made no progress last week, with meetings postponed amid holidays.

NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, noted ongoing discussions for a new contract, but the lack of resolution has left the industry reeling.

Petrol Prices Surge: From N860 to N930

The uncertainty has hit consumers hard. In just one week, petrol prices jumped from N860 per litre to over N930 in Lagos, reaching N950 in Abuja and N960 in the north. Dealers pin the blame on the government’s failure to extend the deal.

Marketers warn that without action, prices could hit N1,000 per litre soon, undoing the relief the deal once provided. The Independent Petroleum Marketers Association of Nigeria (IPMAN) estimates losses of over N200 billion in the past six months due to price swings, discouraging bulk buyers and deepening the crisis.

Dangote Refinery’s Naira Sales Halted

On March 19, 2024, the Dangote refinery, with a capacity of 650,000 barrels per day, halted naira-based petrol sales. Citing a mismatch between naira proceeds and dollar-denominated crude costs, the Lekki-based facility shifted gears, prompting private depots in Lagos to raise loading prices from N850 to N900 per litre.

Partners like MRS, Heyden, and Ardova followed suit, lifting retail prices from N860 to N930 in Lagos and higher elsewhere. Industry sources allege NNPCL’s crude supply is constrained by loans tied to unproduced oil, complicating domestic availability.

The situation may worsen in June 2024, when the Dangote refinery’s petrol unit is slated for a 30-day maintenance shutdown, per Reuters. This could disrupt supply further, piling pressure on an already strained market and potentially driving prices even higher as Nigeria braces for the fallout.

Stakeholders Demand Action

IPMAN’s National Publicity Secretary, Chinedu Ukadike, decried the price surge, linking it to the naira-for-crude deal’s woes. He announced a stakeholders’ meeting, delayed to May 1, 2025, due to Sallah and Easter breaks, involving IPMAN’s National Working Committee and the Petroleum Products Retail Outlets Owners Association of Nigeria.

Ukadike stressed the deal’s role in curbing price rises and warned of dire consequences without it. Meanwhile, IPMAN Vice President Hammed Fashola accused the government of orchestrating the hike, urging a rethink to spare Nigerians from N1,000-per-litre fuel.

Government Under Fire

Dealers and marketers lambast the Federal Government’s reluctance to renew the deal, arguing it undermines earlier gains. Fashola called on depot owners to consider the masses, noting that while crude oil prices and exchange rates drive costs, the naira-for-crude model could tame local fuel prices.

The refinery’s price cuts between December and March now reversed had offered hope, but rising transport fares and living costs signal broader economic strain as Nigerians grapple with policy shifts.

The naira-for-crude deal is on the brink of its deadline, with negotiations stalled, and petrol prices are climbing. Dangote’s refinery maintenance is also around the corner.

The government needs to act fast, stakeholders demand a return to the naira-based arrangement to stabilize supply and prices. The coming weeks will test whether decisive action can avert a full-blown crisis or if Nigerians must brace for even steeper fuel costs amid an uncertain energy future.

Subscribe to Notifications