In a stunning development that could reshape Nigeria’s energy landscape, Dangote Refinery has announced plans to suspend the supply of petroleum products to the domestic market as of March 19, 2025. This decision, linked to stalled negotiations over the naira-for-crude deal with the Nigerian National Petroleum Company Limited (NNPC), has sent ripples of concern through the country’s downstream oil sector. With the refinery reportedly shifting its focus to exports, Nigerians are bracing for potential fuel shortages, price hikes, and broader economic fallout.
The End of the Naira-for-Crude Deal
The move stems from a breakdown in the naira-for-crude arrangement, a policy introduced in October 2024 to stabilize fuel prices and reduce Nigeria’s reliance on dollar-based imports. Under this deal, NNPC supplied Dangote Refinery with crude oil in exchange for naira, enabling the refinery to sell refined products like petrol and diesel to local marketers in the local currency. The initiative had led to a notable drop in petrol prices—down to as low as N860 per litre in some areas—thanks to a price war between Dangote and NNPC. However, with negotiations for a new agreement faltering, the refinery has decided to halt domestic sales, citing an imbalance between naira-based sales and dollar-based crude procurement.
Sources indicate that Dangote will continue loading fuel for export markets, where it sources crude internationally in dollars. This shift underscores a strategic pivot for the 650,000-barrel-per-day facility, built by Africa’s richest man, Aliko Dangote, to prioritize profitability amid domestic uncertainties. The refinery’s spokesperson, Anthony Chiejina, when contacted, stated he was unaware of any immediate plans to stop supply, but industry insiders suggest the suspension is imminent unless a new deal is struck by the current agreement’s end in March 2025.
Why This Matters for Nigeria
The suspension threatens to unravel recent gains in Nigeria’s fuel market. For months, the Dangote Refinery has been hailed as a game-changer, reducing the nation’s dependence on imported petroleum products—a burden that cost $23.3 billion in 2022 alone. Its entry into the market had sparked competition, driving down prices and easing long-standing fuel queues. Now, with domestic supply at risk, analysts predict a return to scarcity, black market surges, and higher transportation costs that could ripple across the economy.
The timing couldn’t be worse. Nigeria is already grappling with inflation, a weakening naira (hovering around N1,500 to the dollar), and political unrest in regions like Rivers State. A sudden halt in local fuel supply could exacerbate these pressures, hitting consumers and small businesses hardest. Many Nigerians rely on petrol not just for vehicles but also for generators, given the country’s unreliable power grid. A price spike—potentially pushing pump prices above N1,000 per litre—would strain household budgets and fuel public discontent.
Economic and Political Ramifications
Economically, the decision could strain Nigeria’s foreign exchange reserves. If Dangote shifts entirely to exports, local marketers may resume importing fuel in dollars, increasing demand for foreign currency and further weakening the naira. This reverses the original intent of the naira-for-crude deal, which aimed to conserve forex and bolster the local currency. Posts on X suggest growing public frustration, with some accusing the government and NNPC of undermining Dangote to protect import-dependent interests—a claim that, while unverified, reflects widespread skepticism.
Politically, the move adds fuel to an already volatile landscape. The PDP Governors’ Forum has criticized recent federal actions, like the Rivers State emergency declaration, as biased and divisive. A fuel crisis could amplify these tensions, giving opposition parties fresh ammunition to challenge President Tinubu’s administration. Meanwhile, Wike’s influence—seen by some as a shadow player in both Rivers and national politics—looms large, with speculation that the refinery’s decision might align with broader power plays in Abuja.
Dangote’s Perspective and Market Dynamics
From Dangote’s standpoint, the suspension makes financial sense. Selling in naira while buying crude in dollars creates a currency mismatch that erodes profitability, especially as global oil prices fluctuate (Brent crude is currently around $70 per barrel). Exporting fuel allows the refinery to leverage its free-trade zone status in Lagos, maximizing revenue in a stable currency. Critics, however, argue this prioritizes profit over national interest, given the refinery’s promise to end Nigeria’s import reliance—a pledge Aliko Dangote reiterated as recently as 2024 at the Africa CEO Forum.
The downstream sector now faces a paradox. While landing costs for imported petrol have dropped to N797.66 per litre—below Dangote’s recent ex-depot price of N815—marketers may struggle to secure enough supply without the refinery’s domestic output. NNPC, which has supplied over 48 million barrels of crude to Dangote since October 2024, insists negotiations for a new deal are ongoing, but the clock is ticking. If no resolution is reached, Nigeria could see a return to the pre-Dangote era of import dominance, negating years of investment in local refining capacity.
What’s Next for Nigerians?
In the short term, expect disruptions. Fuel queues could reemerge as marketers scramble to source alternatives, and prices may climb as supply tightens. Long-term, the outcome hinges on whether Dangote and NNPC can revive the naira-for-crude framework—or if the government steps in to mediate. For a nation that consumes 30-33 million litres of petrol daily, the stakes are immense. Dangote’s 500 million litres in storage could cushion the blow temporarily, but without a steady domestic supply, that buffer will dwindle fast.
This moment tests Nigeria’s resolve to achieve energy self-sufficiency. The Dangote Refinery, once a beacon of hope, now stands at a crossroads—its next moves could either stabilize or destabilize a fragile economy. For now, Nigerians watch and wait, hoping for a resolution that keeps fuel flowing and affordable.
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