The Dangote Petroleum Refinery, one of the largest in Africa, has revealed that the federal government’s ambitious initiative to sell crude oil priced in Nigeria’s local currency is failing to meet expectations.
According to Edwin Devakumar, the vice-president of Dangote Industries Limited, the refinery is still unable to secure enough crude oil supplies under the naira-based crude sale scheme.
“We need 650,000 barrels per day,” Devakumar told Reuters on Friday. “The Nigerian National Petroleum Company (NNPC) Ltd agreed to provide at least 385,000 barrels per day, but they are not even delivering that.”
He described the deliveries from NNPC under the scheme as “peanuts,” adding that they were far from sufficient to meet the refinery’s needs.
The federal government’s plan to sell crude in naira, aimed at boosting the local currency and reducing Nigeria’s reliance on foreign exchange for oil imports, had raised hopes for a more self-sufficient oil industry. However, the Dangote refinery’s struggles reflect deeper issues with the execution of the initiative.
Devakumar’s comments come as a growing number of industry players express concern over the failure of the naira-denominated crude sales plan. While Dangote’s refinery has been receiving some shipments, the supply is far from adequate to run the plant at full capacity.
Mathins Obaze, an acting executive director of the Crude Oil Refinery-owners Association of Nigeria (CORAN), pointed out that only Dangote’s refinery has benefited from the naira-for-crude arrangement.
“Members of CORAN are still unable to access crude oil in naira and are actively engaging with the government for a resolution,” Obaze said.
The naira-for-crude sale agreement was officially launched on October 5, 2024. At the time, the Nigerian government hailed the arrangement as a significant step toward strengthening the naira and reducing the country’s dependence on dollar-denominated oil deals.
However, the reality has been far more challenging. Since the launch, Dangote refinery received only four cargoes of crude from NNPC under the new agreement. These deliveries, though a step in the right direction, have been far from the expected volumes needed to keep the refinery operational at optimal levels.
The crude oil shortage has forced Dangote refinery to explore alternative sources. On November 21, the refinery took delivery of its first shipment of US oil after a three-month break. This move comes as the refinery seeks to ramp up its production capacity despite the ongoing supply issues.
Despite these challenges, Dangote Industries remains hopeful that the situation will improve. However, Devakumar’s frustration with the situation is clear. “The supply commitments are simply not being met,” he added. “If the government and NNPC want this initiative to succeed, they need to ensure reliable and sufficient crude supply.”
The underperformance of the naira-for-crude scheme has sparked concerns about the future of Nigeria’s oil sector, particularly as the government pushes to diversify and modernize the industry. The Dangote refinery, which is based in Lekki, is a key player in this transformation, but without a steady supply of crude, it faces significant operational challenges.
The federal government’s inability to meet its crude supply commitments under the naira-based arrangement has raised questions about the future of this initiative. The Nigerian government is facing mounting pressure from industry stakeholders to resolve the issue quickly, as the refinery’s output is seen as critical to the country’s energy security and economic growth.
In the past, Nigeria has struggled with oil production and refinery capacity, relying heavily on imports to meet domestic demand. The Dangote refinery, once fully operational, is expected to produce enough refined products to meet local demand and even export to neighboring countries. However, the current supply challenges threaten to delay these goals.
The NNPC’s failure to deliver on its commitments is also affecting other refineries in Nigeria. While Dangote’s refinery is the only one benefiting from the naira-for-crude sale scheme, other members of CORAN are still unable to access crude oil priced in naira. This has led to calls for the government to address the underlying issues and ensure that all refineries can benefit from the initiative.
The government had initially hoped that the naira-for-crude arrangement would help stabilize the naira and reduce Nigeria’s dependence on foreign currency for oil imports. However, with the ongoing challenges in supply and the limited participation of local refineries, the future of the scheme remains uncertain.
