By Springs News NG | March 10, 2025

The Nigerian National Petroleum Company (NNPC) Limited has officially suspended its naira-for-crude oil swap arrangement with domestic refiners, including Dangote Refinery and other private operators.

The decision, which takes immediate effect, has sparked concerns about its impact on Nigeria’s refining sector, fuel prices, and the economy.

Naira-for-Crude Deal: A Short-Lived Policy

Introduced on October 1, 2024, the naira-for-crude policy allowed local refiners to buy crude oil in naira instead of dollars. The initiative aimed to boost domestic refining, cut reliance on fuel imports, and stabilize the naira by easing forex demand.

With its suspension, Nigerian refiners will now have to source crude from international markets, paying in dollars rather than naira. This shift is expected to increase operational costs, potentially leading to higher fuel prices at the pump.

Why the NNPC Suspended the Deal

According to sources, NNPC informed local refiners that its crude oil production is already committed to forward contracts, leaving no supply for domestic refineries. This decision comes despite reports of increased crude output since the policy was introduced.

Impact on Dangote Refinery and Private Operators

The suspension is a major setback for the Dangote Refinery, Africa’s largest private refinery, which has relied on local crude supplies for its refining operations. Analysts warn that the move could disrupt its production timeline and drive up costs.

Other private refiners, including Waltersmith Petroman and BUA Refinery, will also feel the impact, as they previously benefited from the cost-effective local crude supply.

Economic and Currency Implications

Economists warn that ending the deal could worsen the naira’s volatility. The currency has already faced pressure in recent months, and losing a mechanism that reduced dollar demand could further weaken it.

Additionally, the suspension could slow Nigeria’s drive for self-sufficiency in petroleum production, making the country more dependent on imported fuel at a time when global energy prices remain unpredictable.

Industry stakeholders are now calling for a review of the decision to ensure that domestic refiners have sustainable access to crude oil without escalating production costs.