Nigerians Braces for A Fresh Surge in Fuel Prices As Dangote Refinery Halts Sale of Fuel in Naira

Nigeria is preparing for a new increase in fuel prices following Dangote Petroleum Refinery’s decision to stop the sale of petroleum products in NairaA decision of this industry According to experts, could worsen the economic difficulties of the country and intensify the pressure on currencies.

In a statement published on Wednesday, Dangote Petroleum Refinery, the largest refinery in Africa, explained that the temporary judgment of Naira transactions was necessary by a disalcher between its sources of income and the purchase obligations of crude oil, which are settled in US dollars.

“This decision is necessary to avoid an inadequacy between our sales products and our crude oil purchase obligations, which are currently denominated in US dollars,” said the company.

According to the $ 20 billion refinery based in Lagos, the volume of petroleum products it has sold in Naira now exceeds the amount of crude oil called in Naira which it received from the Nigerian National Petroleum Company Limited (NNPCL). The company maintains that once it secures new crude oil supplies in Naira, it will quickly take up the sales of local currencies.

This decision follows the expiration of the Brut-Pour-Nairas agreement between the Dangote refinery and the NNPCL on March 1, 2025. The government introduced the arrangement in mid-2014 as a measurement To facilitate pressure on the US dollar and ensure price stability in the downstream oil sector. Under the six -month agreement, the Dangote refinery and other local refineries received crude NNPCL oil in Naira rather than US dollars.

However, with the expiration of the arrangement, the Dangote refinery is now forced to get crude in foreign currencies, which in turn Affects the currency in which he sells his refined products.

NNPCL, in His defense, said that negotiations were underway to replace the expired contract and stressed that since the start of the arrangement, he had provided Dangote refineries with more than 48 million barrels of crude oil in Naira and a total of 84 million barrels since the start of the refinery in 2023.

The decision to put an end to the sales agreement of crude Naira has aroused concerns, financial and energy analysts arguing that the maintenance of the policy would have protected the Nigeria from foreign currency and the increase in fuel costs.

Financial analyst Kalu Aja described the gross-pour-naira contract as a subsidy that protected consumers when oil prices fell. However, he wondered what would happen if the world prices for crude oil had increased, suggesting that the change in policy could have serious consequences for Nigeria’s economy.

Energy analyst Kelvin Emmanuel awarded Dangote’s decision with two key factors:

1. Manipulation of the market by competitors – According to Emmanuel, a cartel of oil marketing specialists who feel threatened by the lower pricing strategy of Dangote Rafinery can have put pressure on the exchange of crude based on Nairas. This, he said, was a decision to force Dangote to increase prices, thus leveling the rules of the game for importers.
2. Government despair for currencies-Emmanuel also suggested that discussions were underway for a new forward sales agreement that would extend until 2034 and 2.2 times higher than the 2023 arrangement. This, he said, was motivated by the urgent need of the Nigeria Central Bank to settle 3.2 billion dollars in exchange bonds, including $ 1.2 billion Euro-lens in 2025.

Oil marketing specialists have warned that the change in the Dangote sales policy could lead to a significant increase in fuel prices in the coming days.

Independent Public Relations Officer Petroleum Marketers Association of Nigeria (IPMAN), chief Chinedu Ukadike, noted that the change would aggravate the pressure on the dollar, which NOW Become the main currency of exchange for petroleum products.

“The pressure on the dollar will increase because it has become the means of exchange. Marketing specialists will start to sell petrol in the service stations in dollars. And this will have a negative impact on the prices of petroleum products across the country,” said Ukadike.

He also revealed that marketing specialists had been informed that the gross agreement for the Nairas had officially ended on March 1, contradicting complaints by certain representatives of the government that he was still in place.

With this development, the prices of the pumps, which had temporarily Falls below 1,000 N per liter should climb again. Although the main association of energy marketing specialists in Nigeria (MEMAN) recently reported a slight reduction in the cost of landing imported petrol – from N817.82 per liter on March 14 to N797.66 per liter – analysts warn that without the local crude crude supply of the Dangote refinery, the descending trend will be short -lived.

The Nigeria energy sector remains in crisis, supported by the long -standing ineffectiveness of public refineries, which have been non -operational for decades until 2024. Despite efforts to relaunch the sectorThe country is still based on imported refined oil products, with NNPCL portion as a major importer.

THE Deletion of fuel grants in May 2023 by President Bola Tinubu He also aggravated the situation, which raised the prices of gasoline between 200 N200 per liter to 1,000 n per liter. This has deepened the economic difficulties for millions of Nigerians who depend on petrol not only for transportation but also for power generators in the absence of A stable power supply.

Last december, Dangote Refinery Begun Operations With An Initial Refining Capacity of 350,000 Barrels Per Day, With Plans to Reach its Full 650,000 BARLES PER DAY CAPACITY by the End of 2025. While the Refinery has Already Begun Supplying Diesel, Aviation Fuel, and NOW PETROL to the domestic market, its pricing strategy and It is Negotiations underway with the government remain essential to determine the future of the affordability of fuels in Nigeria.

However, the judgment of the Naira-For-Crude agreement means that Nigeria returns to the full dollarization of the oil sectorA situation that will cause additional pressure on the economy by potentially aggravating inflationary pleasures.