Nigeria is facing a sharp rise in fuel prices following the collapse of the naira-for-crude agreement between the Dangote Refinery and the Nigerian National Petroleum Company Limited (NNPCL). Introduced in October 2024, the deal was meant to stabilise fuel prices and support local refining by allowing domestic crude purchases in naira instead of dollars. However, its failure has triggered severe economic challenges, affecting millions of Nigerians.
The breakdown of this agreement has forced Dangote Refinery, a key player in Nigeria’s energy sector, to buy crude oil from international suppliers using dollars. This has significantly increased costs, pushing petrol prices are gradually going be you ₦900 per litre, up from ₦860. As the effects ripple through the economy, five major consequences have emerged.
Fuel Prices Continue to Rise, Worsening Economic Hardship
The most immediate impact of this policy failure is the rising cost of fuel, which is making life harder for Nigerians. Without access to crude priced in naira, Dangote Refinery’s increased costs are driving petrol prices higher. The situation is even worse in the black market, where fuel is selling at record rates. Mr Jeremiah, who is the Chief Executive Officer of Petroleuprice.ng expressed that “If Dangote refinery and NNPCL are unable to reach a consensus in the next 48 hours, fuel pump prices might hit ₦1000/litre in the coming days”, as at the time of writing, long queues have returned to filling stations, and the ripple effect on transport and food prices is hitting households hard. “We were told this would improve our situation,” lamented Mercy Okon, a Lagos trader. “Instead, we are struggling more than ever.”
The Naira is Under Pressure
With refineries forced to source crude in dollars, demand for foreign currency has surged, further weakening the naira. The exchange rate now stands at ₦1,536.75 per dollar, putting additional strain on Nigeria’s already struggling forex reserves. This depreciation is fuelling inflation, making essential goods and services more expensive. Financial analyst Ada Eze noted, “This policy was supposed to protect the naira, not devalue it further.”
Nigeria’s Energy Independence is Threatened
The deal was designed to ensure a steady supply of locally refined fuel and reduce reliance on imports. However, NNPCL’s inability to meet domestic crude demand, due to export commitments, has forced Dangote Refinery to look abroad for crude supply. As a result, Nigeria remains vulnerable to global oil price fluctuations, despite its vast crude oil reserves.
Refinery Costs Are Rising
Buying crude from international markets in dollars has significantly increased operational expenses for Dangote and other refineries. Beyond the higher cost of crude, added expenses such as shipping and logistics are worsening the situation. With the weakening naira, these rising costs are being passed on to consumers, driving up fuel prices. “Refineries cannot absorb these costs,” said an industry source. “The financial burden ultimately falls on ordinary Nigerians at the pump.”
Investors Are Losing Confidence
The collapse of the naira-crude arrangement has raised concerns about Nigeria’s ability to implement stable policies in the energy sector. Originally seen as a transformative initiative, its failure after just a few months has made investors wary. Both local and foreign investors seek predictable policies, and this sudden reversal has created uncertainty. Energy consultant Tolu Akinwumi warned, “Investors need stability and clear direction, but this crisis has done the opposite.” The loss of confidence could delay future investments crucial to Nigeria’s refining industry.
A Broken Promise
The failure of the naira-for-crude deal has exposed deeper structural issues within Nigeria’s oil sector, from poor coordination of crude supply to ongoing forex challenges. Despite being one of the world’s largest oil producers, Nigeria remains highly dependent on international markets for refined fuel. With no clear solution from the government, Nigerians continue to bear the brunt of rising costs and economic uncertainty. What was once a promise of affordable, locally refined fuel has instead become a harsh reality of soaring prices and financial strain.
