The Nigerian National Petroleum Company Limited (NNPC) and Dangote Petroleum Refinery are nearing the conclusion of discussions on an agreement that would involve NNPC selling crude oil to the Dangote Refinery in naira. The deal also includes a buy-back arrangement for refined petroleum products from the $20 billion refinery, also in naira.
Devakumar Edwin, Vice President of Oil and Gas at Dangote Industries Limited, announced that talks could be finalized as early as next week. He made the statement during a session organized by Nairametrics on X (formerly Twitter).
Edwin revealed that as part of the deal, the NNPC has requested to monitor the production of refined products at the refinery. The state-owned oil company, which will supply crude to Dangote, has asked for office space within the refinery for a team of six to ten personnel to oversee operations.
“NNPC is going to monitor the production and then buy it back in naira,” Edwin explained. “We are still in discussions, and hopefully, by next week, if it gets concluded, we can kick off.”
The Dangote Group, led by its President Alhaji Aliko Dangote, opted to negotiate in naira due to the country’s foreign exchange challenges. Edwin noted that despite internal objections, Dangote insisted on this arrangement to help mitigate Nigeria’s dollar scarcity. “The currency value is dropping every day. Yes, I know I am going to take a loss…but the country is in bad shape. Somebody has to take certain risks,” Dangote said, according to Edwin.
Meanwhile, Edwin revealed that oil marketers have been boycotting diesel and aviation fuel produced by the Lekki-based plant, accusing it of disrupting their businesses with lower prices. Marketers have complained to President Bola Tinubu about the refinery’s diesel prices, which have fallen from N1,200 to N900 per litre. Despite having the capacity to load 2,900 tankers daily, local petroleum product importers are reportedly avoiding the refinery, and it currently sells only about 29 tankers of diesel per day.
The boycott has led the refinery to focus on exporting most of its diesel and aviation fuel. “We are exporting our petroleum products. PMS, we are ready to pump in as much as possible to the country. But if the traders or NNPC are not buying the product, we will end up exporting the PMS as we are doing with the aviation jet and diesel,” Edwin said.
In August 2024, the Federal Government announced that the sale of crude oil to the Dangote refinery and other local refineries would commence on October 1, 2024. This was confirmed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during a meeting of the Implementation Committee.
Despite the challenges, Edwin remains optimistic about the refinery’s potential to meet Nigeria’s local demand. He criticized the ongoing blockade by petroleum product marketers and emphasized that the refinery can survive through exports if local patronage remains low. “Is that why he invested in the refinery?” Edwin asked, reflecting on Dangote’s vision to add value to Nigeria’s raw materials rather than just exporting crude and importing refined products.
In another development, NNPC’s spokesperson, Olufemi Soneye, responded to comments by Dr. Muiz Banire, SAN, a former Commissioner of Transport and Environment in Lagos State, who blamed NNPC for Nigeria’s fuel scarcity. Soneye refuted the claims, clarifying that NNPC only implements government policy on fuel subsidies and is not responsible for creating them.
As the discussions between NNPC and Dangote Refinery continue, the industry is closely watching to see if this naira-based deal will bring a new dynamic to Nigeria’s oil and gas sector.
