The Dangote Refinery, Africa’s largest oil refinery, is reportedly increasing its crude oil imports from Angola and Algeria as discussions continue over the naira-for-crude arrangement with the Nigerian government.
This move comes as Nigeria negotiates a revised naira-for-crude deal aimed at stabilizing the local currency and reducing dependence on foreign exchange for oil transactions. The $19 billion Dangote Refinery has played a crucial role in reducing Nigeria’s reliance on imported fuel, but with production nearing full capacity, the refinery is exploring additional crude supply sources to meet its operational demands.
Dangote’s Growing Crude Imports
Recent data from Bloomberg reveals that the refinery has received over three million barrels of American crude since the beginning of the month. In addition, the facility has sourced shipments of Angola’s Pazflor grade and Algeria’s Saharan Blend from Glencore Plc in recent weeks.
According to Energy Aspects Ltd., crude deliveries to Dangote Refinery have averaged 450,000 barrels per day in the past two weeks, up from an estimated 380,000 barrels per day in January and February. “Our satellite monitoring shows a recent draw in crude stocks at the refinery, indicating runs are likely on the rise,” said Randy Hurburun, a senior refinery analyst at the consultancy.
Uncertainty Over Naira-for-Crude Deal
Earlier reports indicated that the Nigerian National Petroleum Company Limited (NNPCL) had suspended the naira-for-crude deal until 2030, as it had forward-sold its crude oil. However, within 24 hours, NNPCL clarified that negotiations were still ongoing for a new agreement with the Dangote Refinery.
Analysts caution that abruptly ending the naira-based crude supply arrangement could disrupt Nigeria’s foreign exchange market, potentially reversing recent gains in the naira’s valuation. The move also raises concerns about the government’s broader energy strategy, as domestic refining was expected to reduce fuel import dependence.
Challenges in Local Crude Supply
In October 2024, the Federal Executive Council (FEC) approved a plan to allocate 450,000 barrels of crude per day for local refining, with Dangote Refinery designated as the pilot beneficiary, receiving 385,000 barrels per day from NNPCL. However, the initiative faced setbacks as NNPCL struggled to meet its supply commitments.
By November 2024, Dangote Refinery had raised concerns about insufficient crude supply under the naira-for-crude framework, signaling early difficulties with the arrangement. Now, with NNPCL withdrawing from the deal, local refiners may be forced to secure crude at significantly higher costs from international markets.
Future of Nigeria’s Refining Sector
This latest development highlights the ongoing challenges in Nigeria’s petroleum industry, raising critical questions about the sustainability of domestic refining and fuel affordability.
“We need 650,000 barrels per day. The NNPCL agreed to provide a minimum of 385,000 bpd, but they are not even delivering that,” said Edwin Devakumar, Vice President of Dangote Industries Limited (DIL).
As uncertainty looms over the future of the naira-for-crude policy, stakeholders continue to urge the government to prioritize stable and sustainable crude supply mechanisms for local refineries.
