The Federal Government and Dangote Refinery are set to engage in high-level discussions on a potential naira-for-crude arrangement following the refinery’s importation of 12.6 million barrels of crude oil. The talks come amid ongoing efforts to stabilize Nigeria’s foreign exchange market and ensure local refining capacity meets the country’s fuel demands.
Dangote Refinery, a 650,000-barrel-per-day facility that was expected to significantly reduce Nigeria’s dependence on imported refined petroleum products, has been sourcing crude oil from international markets despite Nigeria being a major producer. The refinery’s recent importation of 12.6 million barrels raises questions about local crude supply constraints and the viability of sourcing feedstock domestically.
Industry analysts point to a combination of factors, including production challenges faced by the Nigerian National Petroleum Company (NNPC) and contractual obligations that prioritize exports, limiting local crude availability.
In response, the Federal Government is pushing for a deal where Dangote Refinery can purchase crude oil in naira rather than in US dollars. This strategy aims to ease pressure on Nigeria’s forex reserves, strengthen the local currency, and enhance the refinery’s role in domestic energy security.
A government official familiar with the matter disclosed that the proposal is being considered as part of broader efforts to reform Nigeria’s oil sector. “This initiative is in line with our commitment to supporting local industries while reducing dependence on external markets for crude transactions,” the official said.
While the naira-for-crude arrangement could ease forex demand, challenges remain. Oil producers may be reluctant to accept naira payments, preferring dollar-denominated transactions due to concerns over currency stability. Additionally, questions about the appropriate exchange rate mechanism and government incentives for local crude supply remain unresolved.
“The fundamental issue is trust in the currency. For this arrangement to work, the government must ensure exchange rate stability and clear payment structures,” said energy economist Dr. Emmanuel Oche.
Negotiations between the government and Dangote Refinery are expected to address these concerns, with a focus on ensuring a win-win situation for all stakeholders. If successful, the naira-for-crude deal could serve as a model for similar agreements with other local refiners in the future.
For now, industry watchers are closely monitoring the outcome of these discussions, as the refinery’s ability to access crude efficiently will play a critical role in determining fuel prices and supply stability in Nigeria.
