Fuel crisis looms as Dangote refinery halts Naira sales

• Published On: 24 March 2025 at 19:52

The Dangote Petroleum Refinery's recent decision to suspend the sale of petroleum products in naira has prompted panic buying among filling station operators.

Some fuel retailers have begun stockpiling Premium Motor Spirit, anticipating a price increase as a result of the Federal Government's refusal to continue crude oil sales to the refinery in local currency. This move has sparked concerns about fuel scarcity and hoarding in the downstream petroleum industry.

Following the Dangote refinery announcement, the cost of loading petrol at private depots in Lagos increased to around N900 per litre, up from less than N850 per litre prior to the decision. Independent marketers have responded by purchasing and storing large amounts of fuel, anticipating increased resale profits if prices rise further.

However, the Independent Petroleum Marketers Association of Nigeria has warned against such speculative buying, citing potential losses if the refinery reverses the price increase.

"Some depot owners have already raised prices, but we advise our marketers not to panic buy. "If Dangote Refinery later lowers its prices, those who have stockpiled fuel at higher rates may suffer significant losses," IPMAN's National Publicity Secretary, Chinedu Ukadike, said in an interview.

Last week, the Dangote Refinery, which processes 650,000 barrels per day, announced a temporary halt to naira-based sales due to a currency mismatch in its crude purchase agreements. The company explained that its crude oil procurement costs are denominated in US dollars, which causes financial imbalances when selling refined products in naira.

"We have sold more petroleum products in naira than we have received in naira-denominated crude. To match our crude procurement currency, we must temporarily change our sales strategy," the refinery stated.

Since the announcement, the Federal Government has yet to issue an official response, leaving industry stakeholders uncertain about the future of the naira-for-crude agreement. The uncertainty has fuelled speculation among depot owners, who have quickly raised prices, risking supply chain disruptions.

Meanwhile, oil marketers and industry experts warn that the suspension may put additional pressure on the foreign exchange market, as fuel importers will now need more US dollars to buy petroleum products.

Ukadike of IPMAN advised marketers to avoid making excessive purchases in order to avoid financial risks. "We urge our members not to overstock at high prices, as a sudden price drop could lead to heavy losses," he mentioned.

Sources from the Federal Ministry of Finance and the Federal Ministry of Petroleum Resources confirmed that a technical committee on the naira-for-crude policy will reconvene today (Monday) to resolve the impasse. The Nigerian Upstream Petroleum Regulatory Commission has been tasked with proposing solutions to re-establish the agreement and ensure continued local crude supply.

A government insider stated that the naira-for-crude transaction would not be permanently halted, but that the Nigerian National Petroleum Company Limited faces challenges in crude oil availability. The source revealed that large amounts of future crude production had been pre-sold to secure international loans, limiting supply to domestic refineries.

According to industry sources, the halting of the naira-for-crude deal could be a strategic move to limit Dangote refinery's growing market influence. Some downstream players have accused the refinery of monopolistic practices, claiming that its pricing strategy has disrupted market dynamics.

Meanwhile, domestic crude refiners argue that suspending the agreement jeopardises efforts to ensure energy security. The Crude Oil Refinery Owners Association of Nigeria criticised the move, claiming that it contradicts the government's efforts to promote local refining.