The Nigerian National Petroleum Company (NNPC) Limited has halted the naira-for-crude oil swap deal, affecting domestic refiners like Dangote Refinery and other private operators.
This sudden decision has ignited discussions on its impact on Nigeria’s energy sector and overall economy.
Launched on October 1, 2024, the naira-for-crude arrangement allowed local refiners to buy crude oil using naira instead of dollars. The initiative aimed to strengthen domestic refining capacity, reduce dependence on imported petroleum products, and stabilize the local currency by lowering pressure on foreign exchange reserves.
With the deal now discontinued, Nigerian refineries, including the highly anticipated Dangote facility, must source crude oil from international suppliers and pay in dollars instead of naira. This change is expected to drive up operational costs, which may result in higher fuel prices for consumers.
Sources familiar with the situation revealed that NNPC has already allocated its crude oil production to forward contracts, leaving no available supply for local refineries. This disclosure comes despite reports indicating that Nigeria’s crude production has increased since the deal’s introduction.
Industry stakeholders have expressed concerns over the suspension, particularly for the Dangote Refinery, which is set to become one of Africa’s largest refining facilities.
Owned by billionaire Aliko Dangote, the refinery has significantly benefited from the naira-for-crude arrangement by securing locally sourced crude for its operations. Analysts warn that this suspension could extend the refinery’s timeline and escalate production costs.
Other private refiners, such as Waltersmith Petroman and BUA Refinery, are also expected to face challenges. The agreement had offered them an affordable way to obtain crude oil feedstock, enabling them to compete with international refiners.
Economic analysts caution that this decision could trigger widespread effects on Nigeria’s economy. The naira has already struggled with severe pressure in recent months, and removing this dollar-saving mechanism might worsen its volatility.
Additionally, this move could obstruct Nigeria’s efforts to achieve self-sufficiency in petroleum production, a major priority for the federal government.
Source:businessday.ng
