Dangote Refinery Receives First Crude Oil Cargoes in Naira-for-Crude Deal
The Dangote Petroleum Refinery has taken delivery of four cargoes of crude oil from the Nigerian National Petroleum Company Limited (NNPCL) as part of a newly implemented naira-for-crude agreement, government and refinery officials confirmed on Tuesday.
The crude shipments, delivered over the past three weeks, are part of a pilot scheme that allows local refineries to purchase crude oil in Nigeria’s local currency rather than dollars. The $20bn Dangote refinery, located in Lekki, Lagos, is now preparing to commence sales of refined petrol to domestic dealers, according to informed sources involved in the sale.
An official close to the government’s Technical Subcommittee on Domestic Sale of Crude Oil in Local Currency, who spoke anonymously, disclosed that more deliveries are expected soon. “More cargoes will be delivered to the Dangote refinery in the coming weeks,” the official confirmed, adding that the programme is initially scheduled to last six months, with the possibility of extension.
This agreement represents a key element in President Bola Tinubu’s broader economic policy aimed at stabilising Nigeria’s energy market by ensuring the country’s largest refinery is adequately supplied with crude oil. Tinubu’s Federal Executive Council had approved the sale of 450,000 barrels of crude oil per day for local consumption, using the Dangote refinery as a test case.
The refinery, with a processing capacity of 650,000 barrels per day, has faced challenges in securing a stable supply of crude oil since commencing operations earlier this year. Dangote Group President Aliko Dangote has publicly accused international oil companies of hindering access to Nigeria-produced crude, forcing the refinery to purchase oil through foreign intermediaries at inflated prices.
NNPCL’s commitment to supplying crude in naira, however, has begun to shift this dynamic. The refinery’s management stated it has received four cargoes thus far and expects more to follow, allowing the facility to ramp up production. The refinery will soon start selling petrol, diesel, and other products domestically in naira, officials said, marking a significant shift in Nigeria’s fuel market.
Crude supply to the Dangote refinery is expected to ease Nigeria’s reliance on fuel imports, which have historically met the bulk of domestic demand. Local marketers have expressed optimism that the refinery will help stabilise prices and increase fuel availability.
“The supply of crude to the Dangote refinery is a major step in addressing the petrol shortfall,” said Chinedu Ukadike, spokesperson for the Independent Petroleum Marketers Association of Nigeria. “We expect this to reflect in increased availability of refined products soon.”
However, market observers caution that it may take time before the full impact is felt. Early October data from S&P Global Commodity Insights indicated a sharp drop in petrol imports to Nigeria, signalling a potential shift in the supply chain as domestic production takes hold. Still, the refinery is currently producing far below its capacity, with only 317 million litressupplied to the market between September and October.
The naira-for-crude arrangement marks a crucial turning point for Nigeria’s energy sector, although challenges remain. The Independent Petroleum Producers Group (IPPG) has voiced concerns about the deal’s impact on local oil producers, arguing that crude allocations for local refining could affect foreign exchange earnings.
Despite these issues, there is optimism that increased local refining capacity will benefit the economy in the long term. With four cargoes delivered and more on the way, the Dangote refinery’s journey to full operation may finally be gathering momentum.
