Despite Non-Renewal of Naira-for-crude Contract, NNPC Insists Policy Not Yet Cancelled

The Nigerian National Petroleum Company Limited (NNPC) has announced that its six-month naira-for-crude agreement with Dangote Refinery is set to expire at the end of March 2025. This development comes despite reports that the Dangote Refinery’s operations have been impacting the profit margins of European refiners.

The naira-for-crude policy, initiated in October 2024, allowed NNPC to supply crude oil to Dangote Refinery in exchange for payment in naira. This arrangement aimed to bolster local refining capacities and stabilise fuel prices in Nigeria. Since its inception, NNPC has supplied over 48 million barrels of crude oil to Dangote Refinery under this agreement, totalling over 84 million barrels since the refinery commenced operations in 2023.

The Dangote Refinery, with a capacity of 650,000 barrels per day, has played a significant role in the global oil market. Its operations have reduced Africa’s reliance on European fuel imports, leading to increased competition and reduced profit margins for European refiners. Concerns have emerged about potential increases in fuel prices if a new agreement is not finalised promptly. 

However, the NNPC has, in a press release, denied reports of the alleged termination of the crude oil sales agreement in naira between NNPC and Dangote Refinery. 

To clarify, the contract for the sale of crude oil in naira was structured as a six-month agreement, subject to availability, and expires at the end of March 2025. Discussions are currently ongoing towards implementing a new contract. Under this arrangement, NNPC has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024. In aggregate, NNPC has made over 84 million barrels of crude oil available to the refinery since its commencement of operations in 2023, the statement reads in part. 

The claims that the sale of crude oil in naira might be terminated emerged following a report that  Chatham House, a UK-based international affairs think tank, had advised the Nigerian government against strengthening the naira. In an article titled ‘Nigeria’s Economy Needs the Naira to Stay Competitive,’ the think tank highlighted that the naira’s depreciation has made the Nigerian economy more competitive and that allowing the currency to appreciate could hinder sustainable, long-term growth. 

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