The Nigerian National Petroleum Company (NNPC) Limited has halted the naira-for-crude oil swap arrangement with domestic refiners, including Dangote Refinery and other private operators.
The suspension, which took effect immediately, has sparked concerns about its impact on Nigeria’s refining sector and broader economic implications.
The naira-for-crude policy, introduced on October 1, 2024, allowed local refiners to purchase crude oil in naira instead of dollars. The initiative was designed to support domestic refining, reduce reliance on fuel imports, and ease pressure on Nigeria’s foreign exchange reserves.
With this suspension, refineries such as the Dangote Refinery will now have to source crude oil from international suppliers and pay in dollars rather than naira. This shift is expected to increase operational costs and could lead to higher fuel prices for consumers.
Sources familiar with the matter revealed that NNPC had already committed its crude oil production to forward contracts, leaving no allocation for domestic refineries. This comes despite reports that Nigeria’s crude output has been on the rise since the swap deal was introduced.
The decision is particularly significant for the Dangote Refinery, a $19 billion project expected to be one of Africa’s largest refining facilities. The refinery had been a key beneficiary of the naira-for-crude arrangement, relying on locally sourced crude to support its operations. Analysts warn that the suspension could lead to delays in its production timeline and increased costs.
Other private refiners, such as Waltersmith Petroman and BUA Refinery, are also expected to feel the impact, as the swap deal had provided them with a cost-effective way to secure crude oil feedstock.
Economists caution that the move may have broader economic consequences. With the naira already under pressure in the foreign exchange market, removing a mechanism that helped conserve Nigeria’s dollar reserves could worsen currency volatility.
Additionally, the decision could slow down the country’s progress toward self-sufficiency in petroleum refining, a key goal of the federal government.