Dangote Refinery’s decision to stop selling crude oil in Naira was inevitable due to Nigeria’s economic realities and crude supply challenges. Economist and energy expert Kevin Emmanuel stated that the move was predictable, given the unstable political and economic conditions affecting Nigeria’s oil sector.
Crude Supply Constraints and Political Instability
Nigeria’s crude oil production is under pressure, with Rivers and Bayelsa States producing 674,000 barrels per day out of the country’s 1.4 million barrels per day output. However, recent political turmoil in Rivers State, including a state of emergency and pipeline attacks, has further strained supply.
One critical pipeline, the Trans Niger Pipeline, was blown up, forcing operators to use a backup line. Emmanuel described its significance, stating, “That pipe can take about 450,000 barrels of crude oil from Lactamitas to Bonny River Terminal… it controls about 32% of Nigeria’s daily output.”
The disruptions come at a time when the government is struggling to increase oil production to 2 million barrels per day to support the 2025 budget. Emmanuel warned that “trying to inflame the political environment in Rivers State couldn’t have come at a worse time” given the country’s economic struggles.
Emmanuel highlighted that the Nigerian government has already committed a significant portion of its crude oil to forward sale agreements, limiting the supply available for local refineries. He revealed, “500,000 barrels of Nigeria’s output is already committed in forward sale agreements… the government is planning to take another forward sale agreement worth $5.5 billion, pledging Nigeria’s crude till 2034.”
Dangote Refinery Forced to Import Crude
Despite being a major oil producer, Nigeria has not been able to supply enough crude to Dangote Refinery, forcing it to import over 6 million barrels of crude in February and nearly 10 million barrels in March. Emmanuel questioned, “How does it make sense that Nigeria, a major OPEC member, has its major refiner importing crude oil from outside the country to refine?”
Since launching its local sales programme in October 2024, Dangote Refinery initially processed 110,000 to 120,000 barrels per day in Naira. However, this gradually declined to 61,000 barrels per day by February 2025 before being completely halted in March. Emmanuel explained that despite Dangote Refinery selling below Platts benchmark prices, it faced difficulties securing crude at competitive rates within Nigeria.
Government’s Refinery Claims Under Scrutiny
The Nigerian National Petroleum Company Limited has maintained that its Port Harcourt and Warri refineries are operational, yet it continues to import petrol. Emmanuel pointed out, “NNPCL borrowed $2.4 billion for refinery rehabilitation, but they are still importing like before.”
NNPCL’s 20% stake in Dangote Refinery further complicates the issue, raising questions about why it is not prioritising crude supply to the refinery. Instead, Emmanuel noted, “NNPCL has pre-sold large crude volumes to foreign creditors, making it difficult to meet domestic refining needs.”
Economic Risks and the Need for Policy Action
Emmanuel warned that political instability and poor crude allocation policies could hurt Nigeria’s economy. The state of emergency in Rivers State has raised concerns about further disruptions, as the region is crucial to Nigeria’s oil production.
With the Naira weakening and government revenue under pressure, ensuring a stable crude supply to local refineries is critical for economic stability. Emmanuel stressed, “Until Nigeria addresses its crude supply challenges, Dangote Refinery’s decision to suspend sales in Naira was not only necessary but unavoidable.”
