Fuel prices set to rise further as Naira-for-Crude deal talks stall

There is growing concern in Nigeria’s oil and gas sector as businesses wait for the government to decide on the future of the naira-for-crude deal between the Nigerian National Petroleum Corporation (NNPCL) and the Dangote Petroleum Refinery.

The current deal, which started in October 2024, ends today, March 31, 2024. Talks about renewing or ending the agreement are still ongoing, but no final decision has been made yet.

As a result, fuel prices are already feeling the impact. Petrol prices have risen sharply in the past week, going from around N860 per litre to over N930 per litre. Dealers have blamed the increase on the government’s delay in extending the naira-for-crude deal.

Marketers are now predicting further hikes in petrol prices, with some suggesting it could reach N1,000 per litre in the coming weeks if the deal is not renewed.

Additionally, the Dangote refinery, which processes 650,000 barrels of crude oil per day, is expected to shut down its petrol production unit for maintenance in June for around 30 days, according to reports.

An insider at the finance ministry, familiar with the ongoing discussions, revealed that little progress has been made so far. They said that no meetings took place last week, and it is expected that talks will resume after the holidays.

The naira-for-crude deal, which started on October 1, 2024, aimed to improve the supply of fuel, reduce the country’s dependence on imported products, and lower petrol prices. Under the deal, the Dangote refinery received crude oil paid for in naira, saving the country millions in foreign exchange.

NNPC recently confirmed that the Dangote refinery had received 48 million barrels of crude in naira, with a total of 84 million barrels delivered since the refinery began operations in 2023. The deal was originally set for six months, with both parties now negotiating a possible renewal.

However, the situation took a turn on March 19 when Dangote refinery announced it would temporarily stop selling petroleum products in naira. The refinery explained that it had received more naira-denominated crude than its sales could cover, which had created a financial mismatch with its crude oil purchase obligations, which are paid in US dollars.

Following the announcement, petrol prices at private depots in Lagos jumped to about N900 per litre, up from less than N850. Retail stations also raised their prices, with petrol now costing around N930 in Lagos, N950 in Abuja, and N960 in the north.

Industry insiders say the deal collapsed because NNPC had already used large amounts of its crude oil to secure loans from international banks, leaving it with insufficient supplies for the local market.

Although there is hope that a new deal will be agreed upon soon, the ongoing uncertainty has led to higher fuel prices. During the Eid-el-Fitr celebrations, prices in Lagos and surrounding areas rose from N860 to N930 per litre, with even higher prices in the north.

This increase in fuel costs is also pushing up transport fares, adding to the financial strain on Nigerians. Many had hoped for relief, but the delay in renewing the deal is worsening the country’s cost of living.

With agency reports