Naira-for-Crude: Marketers Fear Price Hike as FG Suspends Sale to Dangote
The suspension of crude oil sales to the Dangote Petroleum Refinery in naira has sparked concerns among petroleum marketers, who fear an imminent price hike in Premium Motor Spirit (PMS), commonly known as petrol. This development has led to stockpiling by some filling stations, anticipating an increase in fuel prices, The PUNCH reports.
Depot Owners Accused of Profiteering
The Independent Petroleum Marketers Association of Nigeria (IPMAN) has condemned depot owners for allegedly stockpiling and inflating fuel prices in response to the suspension of the naira-for-crude policy. IPMAN’s National Publicity Secretary, Chinedu Ukadike, warned that such speculation could result in financial losses if the Dangote refinery later reduces prices.
“Some depot owners are already increasing the price. But we are also asking our marketers not to panic-buy. Because definitely, when the Dangote refinery comes back and reverses the price, it will be a huge loss for these marketers,” Ukadike said.
Despite IPMAN’s warning, many marketers have continued to accumulate fuel stocks in anticipation of price hikes.
Dangote Refinery Suspends Naira Sales
Last week, the Dangote refinery halted the sale of petroleum products in naira, citing the need to align its sales proceeds with its crude oil procurement obligations, which are denominated in US dollars.
“Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in US dollars,” the company stated.
Following this announcement, the price of loading petrol at private depots in Lagos jumped from below N850 per litre to about N900 per litre.
Government, Dangote Resume Talks
The Federal Government and the Dangote refinery are reportedly in talks to resolve the naira-for-crude dispute, which began after the expiration of the first phase of the agreement that commenced in October 2024. The Technical Sub-Committee on the Naira-for-Crude Policy is expected to reconvene today to deliberate on possible resolutions.
Industry sources revealed that the Nigerian National Petroleum Company Limited (NNPCL) has been struggling with crude oil availability, as large portions of future production have already been committed to loan repayments through forward sales.
A source within the Federal Ministry of Finance confirmed that the NNPCL’s financial obligations have made it difficult to sustain domestic crude supply under the initial agreement.
Impact on the Forex Market and Economy
With the suspension of the naira-for-crude policy, petroleum marketers now need to source dollars to buy fuel from the Dangote refinery. Experts fear this will exert additional pressure on the foreign exchange market, potentially weakening the naira further.
“The naira-for-crude deal emboldened Dangote refinery to lower PMS prices repeatedly, forcing the NNPC to follow suit even when it affected its margins,” said an industry analyst. The sudden halt in the agreement has now led to increased speculation and market instability.
Marketers Advised Against Panic Buying
IPMAN has urged marketers to exercise caution in purchasing fuel to avoid potential losses if the Dangote refinery reduces prices after negotiations.
“We, the independent marketers, are asking our members not to buy excessive volumes of fuel at high rates from depot owners because if Dangote crashes prices, those holding large stocks will face financial losses,” Ukadike advised.
Meanwhile, seven vessels carrying 115,000 metric tonnes (154.22 million litres) of imported PMS were expected to arrive at seaports across Nigeria between March 17 and 23, raising hopes of an improved fuel supply.
Is There a Conspiracy Against Dangote?
Industry insiders speculate that the halt in the naira-for-crude deal may be a strategic move to curtail Dangote’s market influence. Some stakeholders in the downstream sector have accused the refinery of monopolistic tendencies.
Domestic refiners argue that stopping naira crude supply undermines efforts to achieve energy security and could force Nigeria back into full-scale importation of refined petroleum products.
The National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria, Eche Idoko, warned that the policy suspension might hinder the development of local refining capacity.
Looking Ahead
The resolution of the naira-for-crude impasse remains uncertain, but ongoing talks between the government and Dangote refinery offer hope for a possible compromise. However, until a final decision is made, the downstream sector continues to operate under uncertainty, with the potential for fuel price volatility looming large.
The situation underscores the delicate balance between government policy, market stability, and economic realities. While the Dangote refinery has helped reduce fuel prices in the past, the suspension of naira sales highlights deeper structural issues within Nigeria’s oil sector. As negotiations continue, stakeholders await a resolution that will benefit both the industry and consumers.
Reference
Naira-for-Crude: Marketers Fear Price Hike as FG Suspends Sale to Dangote