The suspension of the naira-for-crude arrangement by Dangote Refinery signals a troubling shift in Nigeria’s energy sector, one that could have severe economic consequences for ordinary citizens.
Development Diaries reports that the Dangote Petroleum Refinery recently announced suspension of sales of products in Naira.
In an effort to reduce petrol prices, President Bola Tinubu directed the sale of crude oil to the Dangote refinery in naira.
In October 2024, the Federal Executive Council (FEC) approved the allocation of 450,000 barrels for domestic consumption to be sold in naira to Nigerian refineries, with Dangote Refinery serving as the pilot project.
To oversee implementation, the government formed a committee led by the Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji.
According to media reports, the initial agreement allowed the Dangote refinery to purchase crude oil in naira, helping to stabilise fuel prices and reduce the pressure on foreign exchange reserves.
However, with the breakdown of this arrangement, Dangote Refinery is now forced to source crude in dollars, which means the final price of petroleum products, including premium motor spirit (PMS), will be dictated by fluctuating exchange rates.
Given the persistent depreciation of the naira, this move will inevitably lead to a surge in fuel prices, pushing Nigerians further into economic hardship.
If the price of fuel goes past the N1,000 per litre mark, the cost of transportation, goods, and essential services will skyrocket, worsening inflation and deepening the cost-of-living crisis.
The majority of Nigerians, already grappling with economic instability, will bear the brunt of this development, facing increased prices on everything from food to public transportation.
The government had initially positioned local refining as a solution to fuel import dependency and dollarisation of the petroleum market, but the collapse of this deal suggests that even local refining is now at the mercy of external currency fluctuations.
This raises concerns about the government’s commitment to shield citizens from the adverse effects of market-driven pricing.
A failure to intervene will lead to unbearable fuel prices and also place enormous pressure on Nigeria’s dollar reserves as refiners compete for scarce foreign exchange.
This, in turn, will worsen the devaluation of the naira and cause an increase in inflation, poverty, and economic stagnation.
Development Diaries calls on President Tinubu to act swiftly to prevent further economic strain on Nigerians by ensuring the extension of the naira-for-crude arrangement.
We also call on the Nigerian National Petroleum Company Limited (NNPCL) to commence a renegotiation with Dangote Refinery to maintain crude sales in naira, which will go a long way in preventing an economic disaster.
Immediate action is needed to safeguard the economy, and ensure the everyday Nigerian is not overburdened with the potential increase in fuel prices.
