NNPC Engages Dangote Refinery on Naira-for-Crude Deal Extension

The Nigerian National Petroleum Company Limited (NNPCL) has commenced negotiations with the Dangote Petroleum Refinery regarding the renewal of the naira-for-crude agreement as the initial six-month contract is set to expire on March 31, 2025. The renewed discussions are aimed at ensuring a seamless transition and continued supply of crude oil to the $20 billion Lekki-based refinery.

This development follows reports that the NNPCL had suspended the naira-for-crude agreement until 2030 due to its forward sales of crude oil. However, the state-owned oil company has debunked these claims, emphasizing that the contract renewal process is ongoing.

Breakdown of Crude Supply Under the Agreement

Fresh findings indicate that between October and December 2024, the Dangote Refinery received crude oil valued at approximately ₦486.31 billion under the agreement. The naira-for-crude initiative, which was launched on October 1, 2024, was designed to enhance the supply of crude to domestic refineries, curb reliance on imported petroleum products, and ultimately stabilize fuel prices.

The NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, confirmed that the original agreement was structured as a six-month contract subject to crude availability. Discussions on the renewal are now underway, with both parties working towards a new deal that aligns with market dynamics.

“NNPC Limited has noted recent reports circulating on social media regarding the alleged unilateral termination of the crude oil sales agreement in naira between NNPC and Dangote Refinery,” Soneye stated.

“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 emplacing 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 NNPCL reaffirmed its commitment to supplying crude oil to local refineries based on mutually agreed terms and conditions, highlighting its dedication to strengthening Nigeria’s refining capacity.

Government Reaffirms Commitment to Naira-for-Crude Policy

Zacch Adedeji, Chairman of the Technical Sub-Committee on the naira-for-crude deal, also reiterated the government’s stance on sustaining the initiative. He dismissed speculation about the contract’s termination, noting that there has been no policy-level decision to discontinue the program.

“The policy framework enabling the sale of crude oil in naira for domestic refining remains in force. The initiative was designed to ensure supply stability and optimize the utilization of local refining capacity. There has been no decision at the policy level to discontinue this approach, nor is it being considered,” Adedeji said.

He emphasized that data from the implementation of the initiative over the past few months has demonstrated its effectiveness in improving the availability of refined products and reducing foreign exchange burdens associated with fuel imports.

Furthermore, Adedeji confirmed that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is actively ensuring compliance with the Domestic Crude Oil Obligations as stipulated in the Petroleum Industry Act (PIA). He reassured industry stakeholders that local refineries would continue to have access to domestic crude oil based on structured agreements that take availability, demand, and market conditions into account.

“We remain committed to ensuring the efficient execution of this initiative in line with its core objectives – enhancing local refining, reducing foreign exchange exposure, and stabilizing the domestic fuel supply,” he added.

Calls for Inclusion of Modular Refineries in the Naira-for-Crude Scheme

Commenting on the ongoing contract renewal discussions, the Publicity Secretary of the Crude Oil Refinery-Owners Association of Nigeria, Eche Idoko, stated that the renewal was part of the original plan and that there have been no significant changes to the terms discussed during initial negotiations.

However, he urged the government to fulfill its commitment to supplying crude oil to modular refineries, stressing that meeting their demand of 27,000 barrels per day is crucial to the overall success of the domestic refining sector.

“What the Federal Government said to us during our meetings last year was that they were going to start the pilot phase with Dangote, and when it ends, the second phase, which will start after March, will cover other refineries with a capacity of 27,000 barrels. The reason they started with Dangote was because they needed a refinery that could produce petrol, and only Dangote could do that,” Idoko explained.

He added that the importance of modular refineries should not be overlooked, especially as diesel remains a critical fuel for transportation and logistics.

“We have seen a reduction in the price of products on one hand, and the naira has performed well against the dollar. Given this success, we are supposed to just enter the second phase and not say the government is renegotiating with Dangote. It is supposed to be with all the refineries.”

Financial Implications of the Agreement

An analysis of crude oil liftings from the NNPCL’s monthly Federal Account Allocation Committee (FAAC) reports between October 2024 and February 2025 showed that Dangote Refinery received crude oil valued at ₦486.31 billion. Transactions were priced at $373.76 million, with payments made in naira at an exchange rate advised by Afrexim Bank.

However, records from February 2025 indicated that a total of $126.99 million (approximately ₦199.96 billion) in outstanding payments had yet to be remitted under the agreement. The report further detailed that crude oil supplies were provided on a credit basis, with payments due within 45 days of each barrel’s lifting.

The highest single allocation of crude oil to the Dangote Refinery occurred on October 14, 2024, when it received 598,125 barrels. The lowest allocation, recorded on October 30, 2024, was 5,000 barrels.

A detailed breakdown of crude oil transactions from October 2024 revealed:

• October 14, 2024: A shipment of 100,000 barrels priced at $78.56 per barrel, totaling $7.86 million (₦12.79 billion at an exchange rate of ₦1,628 per dollar).
• October 14, 2024: Another allocation of 598,125 barrels, priced at $78.56 per barrel, totaling $46.99 million (₦76.54 billion at an exchange rate of ₦1,635 per dollar).
• October 23, 2024: A shipment of 597,917 barrels priced at $78.67 per barrel, totaling $47.04 million (₦77.64 billion at an exchange rate of ₦1,650 per dollar).
• October 24, 2024: A shipment of 250,000 barrels priced at $75.37 per barrel, totaling $18.84 million (₦30.81 billion at an exchange rate of ₦1,635 per dollar).

With negotiations still ongoing for a new agreement, industry stakeholders will be closely monitoring the outcomes to ensure continued crude supply stability and the further strengthening of Nigeria’s refining sector. The success of the naira-for-crude initiative will play a significant role in determining the trajectory of Nigeria’s energy sector in the coming years.