Anxiety has gripped the downstream sector of Nigeria’s oil and gas industry as operators eagerly await the Federal Government’s decision on the future of the Naira-for-Crude deal between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Petroleum Refinery. The six-month agreement, which began in October 2024, officially ends on March 31, 2025, and the fate of its extension or complete termination remains uncertain. This deal, which allowed Dangote Refinery to purchase crude oil from the NNPCL in naira instead of foreign currency, has had a significant impact on Nigeria’s fuel pricing and the financial stability of key players in the sector.

The Effect on Petrol Prices and Market Stability

As the deal’s expiration date looms, its effects are already being felt at the pump, with petrol prices experiencing a sharp increase. In just one week, petrol prices surged from around N860 per litre to over N930 per litre, with some dealers blaming the failure to renew the Naira-for-Crude deal for the hike. Marketers have also projected that, without a resolution, the price of petrol could reach N1,000 per litre in the coming weeks, exacerbating the financial burden on Nigerian citizens.

The uncertainty surrounding the continuation of the agreement has created a ripple effect throughout the oil industry, especially among dealers and consumers who are already grappling with the volatility of fuel prices. Industry insiders fear that without the Naira-for-Crude deal, the price of refined petroleum products could climb uncontrollably, further worsening the cost of living in Nigeria.

Dangote Refinery’s Maintenance Schedule and the Deal’s Impact

Amid these concerns, Dangote Petroleum Refinery, which processes an impressive 650,000 barrels of oil per day, is also preparing to shut down its petrol-producing unit for maintenance in June 2025. This planned 30-day maintenance, reported by Reuters, is expected to further disrupt the supply of refined petrol in Nigeria. While the refinery has played a crucial role in stabilizing fuel prices since its operations began, the ongoing uncertainty regarding the Naira-for-Crude deal raises concerns about how these challenges will affect the local fuel supply.

Stalled Negotiations and Government Inaction

An insider at the finance ministry, familiar with the ongoing negotiations regarding the Naira-for-Crude deal, revealed that no significant progress had been made. Despite the urgency of the matter, the committee responsible for the discussions has failed to hold meetings for over a week. “Nothing new has happened. Probably after the holidays, the committee will sit and meet,” the source stated, underscoring the lack of momentum in finalizing a decision. This delay has only added to the uncertainty within the sector, leaving stakeholders in limbo and fueling speculation about potential increases in fuel prices.

A Game-Changer for Nigeria’s Oil Sector

The Naira-for-Crude agreement, which was introduced in October 2024, was originally aimed at improving local fuel supply, reducing reliance on foreign currency for crude oil transactions, and ultimately stabilizing fuel prices in Nigeria. Under the deal, the Dangote Refinery received 48 million barrels of crude oil in naira, helping to reduce the cost of importing petroleum products and prevent dramatic price hikes. However, as the deal nears its expiration, the future of this arrangement remains in jeopardy.

Olufemi Soneye, the Chief Corporate Communications Officer at NNPC, had previously explained that the deal was meant to last for six months, with discussions ongoing regarding its renewal. However, the recent decision by Dangote Refinery to halt the sale of petroleum products in naira on March 19, 2025, has added to the uncertainty. The refinery cited a mismatch between the naira sales proceeds and crude oil purchase obligations denominated in US dollars. This decision prompted an immediate increase in the cost of petrol at private depots in Lagos, pushing prices up to approximately N900 per litre.

Political and Financial Struggles Behind the Deal’s Uncertainty

The collapse of the Naira-for-Crude deal has been attributed to several factors, including the NNPCL’s use of unproduced crude oil to acquire loans from international financial institutions. These loans have reportedly left the national oil company with insufficient crude to meet its obligations to the domestic market. This has contributed to a decrease in local fuel supply, causing the sudden surge in prices. As the political climate surrounding the oil sector becomes more charged, the financial and economic instability tied to these unresolved issues is being felt by consumers and businesses across Nigeria.

Stakeholders Express Concern Over Rising Prices

Industry stakeholders, including the Independent Petroleum Marketers Association of Nigeria (IPMAN), have expressed their concerns over the sharp increase in fuel prices. Chinedu Ukadike, the National Publicity Secretary of IPMAN, criticized the Federal Government for failing to act promptly in renewing the Naira-for-Crude deal, which he believes has been the primary factor behind the recent price hikes. He stated, “Because of this issue, we’ve called for a stakeholders meeting. We are going to meet to discuss it and come out with a way forward.” This meeting, initially planned for April 2025, has been postponed to May 1 due to the Sallah and Easter breaks, adding to the prolonged uncertainty within the industry.

Financial Losses and the Future of Bulk Traders

The volatility in fuel prices has caused significant financial losses for marketers. According to Ukadike, marketers have lost over N200 billion in the past six months due to the fluctuations in petrol prices. He explained that the unpredictable price changes make it difficult for bulk buyers to commit to purchases, as they risk losing money when the price decreases after they’ve already bought stock at a higher rate. “What happens is that when we buy at a price, and vessels load, by the time they get to the depots and point of discharge, Dangote has reduced the price again,” Ukadike stated.

This financial uncertainty has deterred bulk traders, with some scaling back their purchases due to the risks involved. Consequently, the supply chain has been further disrupted, contributing to the inflationary pressures on fuel prices.

Warnings of Potential Price Hike to N1,000 per Litre

IPMAN’s Vice President, Hammed Fashola, has also warned that petrol prices could reach N1,000 per litre if the Naira-for-Crude deal is not renewed. He described the situation as “unfortunate” and urged the Federal Government to reconsider the arrangement to stabilize the local fuel market. “It’s unfortunate the price of PMS is going up again. Although if you look at the crude oil, it is rising, the cause of this matter is Dangote and the naira-for-crude issue,” Fashola said.

A Call for Government Intervention

As the price of fuel continues to climb, Fashola and other stakeholders are calling on the Federal Government to urgently address the issue and renew the Naira-for-Crude deal. They argue that the arrangement had proven beneficial in stabilizing fuel prices and should be reinstated to prevent further financial strain on Nigerian citizens.

The uncertainty surrounding the deal, the price hikes, and the increasing costs of living underscore the need for decisive government action in the oil and gas sector. Whether the Federal Government will renew the Naira-for-Crude agreement remains to be seen, but the consequences of inaction could further disrupt the already volatile market.