Fuel prices set to rise as FG halts crude oil sales to Dangote Refinery

Following the Dangote Petroleum Refinery’s suspension of petroleum product sales in naira, many filling stations have begun stockpiling Premium Motor Spirit (PMS), anticipating a price surge.

Retailers expect petrol prices to rise soon due to the Federal Government’s failure to sustain crude oil sales to the refinery in local currency. The Independent Petroleum Marketers Association of Nigeria (IPMAN) has urged dealers to resist panic buying, warning that overstocking could lead to significant financial losses.

Last week, Dangote Refinery announced a temporary halt in selling petroleum products in naira after its negotiations with the Nigerian National Petroleum Corporation Limited (NNPCL) over a naira-for-crude deal collapsed.

The refinery, which has a production capacity of 650,000 barrels per day, cited concerns over an imbalance between its revenue from sales and its crude purchase obligations, which are settled in U.S. dollars.

“We wish to inform you that Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira to avoid a mismatch between our sales proceeds and crude oil purchase obligations, which are denominated in U.S. dollars,” the refinery stated.

“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. Therefore, we must adjust our sales currency to align with our crude procurement currency.”

Since the announcement, the price of petrol at private depots in Lagos has surged, reaching approximately N900 per litre—up from under N850 per litre before the news broke.

IPMAN’s National Publicity Secretary, Chinedu Ukadike, expressed concern over depot owners profiting from the situation, noting that demand for petrol has spiked, leading to price hikes.

While uncertainty looms over the downstream petroleum sector, with no clear direction from Dangote Refinery on future PMS sales, some filling station operators have already begun purchasing fuel at increased rates, betting on future price hikes.

Ukadike condemned depot owners for exploiting the situation and warned that the price surge could have negative economic consequences.

“Some depot owners are already inflating prices, but we advise marketers not to panic-buy. If Dangote Refinery reverses its pricing decision, those who stocked up at higher rates could suffer major losses,” he cautioned.

He also warned filling stations against excessive stockpiling, as buying at inflated prices could backfire if prices stabilize.

“Marketers should be cautious about purchasing large volumes at these high prices, as they risk financial setbacks if the market corrects itself,” Ukadike added.

Efforts are reportedly underway to resolve the dispute between the Federal Government and Dangote Refinery, with discussions ongoing to restore crude sales in naira.

“I understand that the Federal Government and Dangote Refinery are close to resolving the matter. Both parties are reviewing the naira-for-crude arrangement to allow continued crude sales in naira,” Ukadike disclosed.

Sources within the Federal Ministries of Finance and Petroleum Resources confirmed that the Technical Sub-Committee on the Naira-for-Crude Policy is set to reconvene for further deliberations.

Insiders suggest that while the transaction has been suspended, it is unlikely to be scrapped entirely. However, NNPCL has been struggling with crude supply constraints, partly due to its large-scale forward sales of oil, which have left it with limited domestic reserves.

NNPC spokesperson Olufemi Soneye confirmed that fresh negotiations are ongoing with Dangote Refinery to revive the naira-for-crude agreement.

“We have already supplied 48 million barrels of crude to Dangote Refinery since October. We are working on renewing the agreement as the first phase concludes this month,” Soneye stated.

With Dangote Refinery now requiring dollar payments for petroleum products, marketers may be forced to source foreign exchange, potentially increasing pressure on the naira.

IPMAN’s National Vice President, Hammed Fashola, cautioned that this shift could weaken the naira, which had recently shown signs of stability.

Experts also noted that the naira-for-crude arrangement helped Dangote Refinery keep petrol prices lower, forcing NNPC to follow suit. Some speculate that the suspension of the deal is a strategic move to curtail Dangote Refinery’s dominance in the downstream sector, where it has faced accusations of monopolistic practices.

Independent domestic refiners have criticized the policy shift, warning that it undermines efforts to achieve energy security.

Eche Idoko, National Publicity Secretary of the Crude Oil Refinery-Owners Association of Nigeria, described the decision as a setback to Nigeria’s goal of self-sufficiency in petroleum refining.

To ease supply shortages, seven vessels carrying a total of 115,000 metric tonnes of PMS are expected to arrive at Nigerian ports between March 17 and 23. These shipments will be distributed through the Tincan port in Lagos, Lekki Deep Seaport, and Calabar port in Cross River State to help stabilize fuel supply nationwide.