Petrol price to rise as NNPC halts naira-for-crude deal with local refineries

Nigerians could be on the verge of paying more for Premium Motor Spirit (PMS) as the Nigerian National Petroleum Company (NNPC) Limited has stopped its naira-for-crude deal with Dangote Petroleum Refinery and other local refineries.

With this latest development, local refineries will now have to buy crude oil from international suppliers, paying in dollars instead of naira.

This is expected to drive up production costs and could eventually lead to higher fuel pump prices.

According to reports, the NNPC informed the refineries that it had already forward-sold all its crude, despite production levels now being higher than when the deal was initiated.

News Band reported that Nigeria officially started the sale of crude oil and refined petroleum products in naira to local refineries on October 1, 2024.

The move was meant to improve supply, save the country millions of dollars in petroleum products imports, and ultimately reduce pump prices.

However, multiple sources said the initiative will be suspended until 2030.

A source confirmed that the NNPC has notified Dangote Petroleum Refinery and other local refiners that it will no longer provide crude oil to them, as it has forward-sold all of its crude supplies until 2030.

Despite recent attempts to bolster domestic refining capacity, the country has spent “over $4.3 billion importing 6.38 billion litres of premium motor spirit (petrol) and automotive gas oil (diesel) in just five months”, industry sources said.

The NNPC is said to be among the entities still importing products, an act backed by the recent deregulation of the downstream sector.

Another source said at a time when Nigerians are hoping for further price reductions, “the NNPC unilaterally decided to end the naira-for-crude initiative”.

Meanwhile, the Dangote refinery has not officially commented on the NNPC’s latest decision.

An official from the company stated that they would carefully evaluate their options before deciding on their next steps.

In October 2024, the Federal Executive Council (FEC) approved the allocation of 450,000 barrels of crude oil for domestic refining, with payments to be made in naira.

The Dangote refinery was selected as the pilot project, with an expected supply of 385,000 barrels per day.

The NNPC has faced criticism for failing to meet its supply commitments.

The latest development is expected to create instability in the foreign exchange market, reversing recent improvements in the naira’s value.

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