Nigeria’s oil and gas sector is once again at the centre of economic debate following the recent decision by the Dangote Petroleum Refinery to stop selling petroleum products in naira. This move follows the Nigerian National Petroleum Company Limited’s (NNPC) earlier decision to halt crude oil sales to the refinery in the local currency, citing contractual limitations and foreign exchange realities.
The Dangote Refinery, with a production capacity of 650,000 barrels per day, attributed its decision to the need for financial stability, as its crude oil purchases are priced in U.S. dollars. The company argues that selling refined products in naira exposes it to exchange rate volatility, potentially affecting its profitability and long-term sustainability.
This article examines the key reasons behind these policy shifts, the economic implications for fuel pricing, inflation, and foreign exchange availability, and the ongoing debate between stakeholders. While some industry players support Dangote’s stance as a necessary step to align with global trade practices, others warn that it could strain Nigeria’s forex reserves, increase fuel prices, and worsen inflationary pressures.
Furthermore, the article explores government efforts to review the naira-for-crude policy, potential compromises, and the broader impact on Nigeria’s economic stability. As the country grapples with fluctuating oil revenues and currency depreciation, the decisions made in the coming months will significantly shape the future of its energy sector and economic policies.
The complications in Nigeria’s oil and gas industry recently took centre stage once again as the Dangote Petroleum Refinery announced that it had halted the sale of petroleum products in naira. This decision came on the heels of a corresponding move by the Nigerian National Petroleum Company Limited (NNPC), to halt crude oil sales to the refinery in the local currency.
In an announcement made on March 19, 2025, the 650,000 barrels per day capacity refinery lamented a mismatch between its sales proceeds and its crude oil purchase obligations, which it said are currently denominated in US dollars.
The announcement by Dangote was a sequel to an announcement by the Nigerian National Petroleum Company Limited (NNPC Ltd) that it had terminated the crude oil sales agreement in Naira between it and Dangote Refinery. NNPC in a statement clarified that the contract for the sale of crude oil in Naira was structured as a six-month agreement, subject to availability, and expired at the end of March 2025 and there were discussions towards placing a new contract.
Industry experts familiar with the situation attributed the suspension of the crude-in-naira sales initiative to the Dangote refinery to issues with crude availability, decrying the NNPC’s humongous forward sale of crude and stressing that the national oil company had used large volumes of its yet-to-be-produced crude oil to acquire loans from various international financial institutions, making it tough for the oil firm to have enough crude to supply the domestic market.
The move by both downstream players, NNPC and Dangote refinery, has continued to raise concerns about its impact on fuel pricing, inflation, and access to foreign exchange for local businesses.
In particular, the decision by the Dangote Refinery, to demand fuel payment in dollars has sparked debate among industry stakeholders. Insiders suggest that the move is primarily driven by foreign exchange (forex) realities. The refinery sources its crude oil at international prices and, given the high cost of importation and operations, it seeks to recover costs in a stable currency. The naira’s volatility in the forex market has made it less attractive for large-scale commercial transactions.
“Selling in naira exposes the refinery to exchange rate risks, which could impact profitability and sustainability. By aligning with global standards, the refinery ensures a more stable pricing mechanism,” an energy expert told Valuechain.
Policy Shift?
In July last year, the Federal Executive Council (FEC) directed NNPC Ltd to engage Dangote Refinery and other local refineries to resolve the dispute over the sale of crude oil to them.
The FEC, presided over by President Bola Tinubu, also directed that crude oil sales to the refineries be made in naira and that the refineries sell their refined products to the Nigerian market in naira. In October, the Nigerian government said it had officially commenced the sale of crude oil and refined petroleum products in Naira.
The subsequent commencement of crude oil sale to the refinery in naira and also the sale of refined petroleum products in Naira boosted local refining, reduced the dependence on imported petroleum products, and a gradual reduction in the price of the product at the pump. However, NNPC’s recent announcement suggests a re-evaluation of the policy.
Industry analysts believe that the decision reflects the government’s preference for earning foreign exchange through crude sales rather than settling for naira transactions, which are prone to depreciation. This also aligns with NNPC’s strategy to maximize dollar inflows amid dwindling oil revenues.
A senior official at the corporation, speaking on condition of anonymity, noted that “The global oil industry operates in dollars. Selling crude oil in naira presents financial and operational constraints. The government also needs forex earnings to stabilize the economy.”
Implications for the Nigerian Economy
The immediate impact of these developments is being felt in the downstream petroleum sector. Immediately after the announcement, the cost of loading petrol at private depots in Lagos reportedly jumped to about N900/litre from less than N850/litre before the announcement. Should Dangote Refinery continue to insist on payments in dollars, local marketers and fuel distributors who rely on the refinery for supply may struggle with forex accessibility. This could translate into higher fuel prices at the pump, further exacerbating inflationary pressures in an economy already grappling with rising costs of living.
Industry experts and oil marketers who have weighed in on this matter have warned that the halt in the sales of petrol in Naira by the Dangote refinery could increase the pressure on the foreign exchange market, as dealers would now have to access the United States dollars in large amounts to buy petroleum products. In other words, marketers would have to source dollars before buying petrol from the facility. The Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria, Olufemi Adewole, said, “The naira-for-crude oil transaction framework presents significant risks that could affect Nigeria’s foreign exchange stability and deter foreign direct investment.”
In a statement, Adewole highlighted concerns over the volatility of the naira, emphasising that crude oil transactions are traditionally carried out in US dollars due to its stability and global acceptability.
While the Federal Government said last year that naira-for-crude transactions could enhance economic sovereignty and strengthen the local currency, Adewole disagreed emphasising that policy decisions must prioritise sustainable economic impact.
“DAPPMAN supports all efforts and policies aimed at strengthening the naira. However, these strategies must be capable of driving major economic reforms that address the underlying causes of the naira’s weakness,” he argued.
Commenting on the situation, the National Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Hammed Fashola, said there could be pressure on the naira, and it would lose the stability it had gained lately. Experts have said that the naira-for-crude deal emboldened the Dangote refinery to lower the prices of PMS repeatedly, forcing the NNPC to do so even when it was affecting its margins.
The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) urged the Federal Government not to allow the Dangote refinery to sell petroleum products in dollars to Nigerian marketers. PETROAN National President, Billy Gillis-Harry, said the announcement created tension among marketers who now panic-buy petrol over fear of possible scarcity or price surge.
According to him, allowing the sale of fuel in dollars will hurt the economy, bringing undue pressure and it will worsen inflationary pressure.
“PETROAN opposes the sale of petroleum products or any other products within Nigeria in dollars. We believe that such a practice would have an adverse impact on the economy, bringing undue pressure on foreign currency and exacerbating Nigeria’s already challenging inflationary situation.
“We urge the government to ensure that all transactions within the country are conducted in the local currency, the naira, to protect the economy and the welfare of Nigerians,” he requested.
Valuechain reports that the shift to the sale of fuel in dollar underscores Nigeria’s dependence on crude oil exports for forex earnings. While boosting local refining is crucial for reducing import dependence, the financial structure surrounding the oil industry still prioritizes dollar transactions.
Economists warn that unless Nigeria implements policies to strengthen the naira, the pressure on businesses and consumers may persist. “This is a wake-up call for Nigeria to rethink its forex policies and implement long-term measures to boost local currency stability,” a financial analyst said.
Way Forward
With these new realities, there is an urgent need for the government to intervene to create a balanced framework that supports local refining while addressing forex concerns.
Notably, the Federal Government and Dangote refinery are reviewing the naira-for-crude deal to possibly resume the sale of crude oil in naira to the refinery again. The Technical Sub-Committee on the Naira-for-Crude Policy, it was gathered had mandated the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to come up with options that would be reviewed by the panel. Although scheduled meetings by the Technical Sub-Committee on the Naira-for-Crude Policy, Dangote refinery, and other government officials have failed to hold, there’s strong optimism that the issues will be settled soon.
Some experts suggest that a dual-payment system—where a portion of transactions is settled in naira and the rest in dollars—could be a compromise.
Additionally, increased investment in domestic crude production and refining capacity could reduce reliance on dollar-denominated transactions in the long run. There is also a growing call for policies that encourage forex stability to enable businesses like Dangote Refinery to operate efficiently without exposing local consumers to excessive financial burdens.
As the situation unfolds, all eyes will be on the government, the NNPC, and Dangote Refinery to see how they navigate this critical economic shift. One thing is certain; the stakes for Nigeria’s oil and gas sector—and the broader economy—have never been higher.