FG Halts Naira-for-Crude Deal, Fuel Price Surge Predicted

The suspension of the Federal Government’s naira-for-crude oil arrangement with Dangote Petroleum Refinery has sparked concerns over an imminent hike in fuel prices, prompting some filling stations to stockpile Premium Motor Spirit (PMS), commonly known as petrol.

The decision to halt the sale of crude oil to the Dangote refinery in naira led retailers to hoard supplies, anticipating higher prices. However, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has cautioned against panic buying, warning that retailers could face significant losses.

Read Also:

• Dangote Refinery, FCCPC Clash Over Petrol Monopoly
• Dangote refinery retained 13% of Nigeria’s crude exports – Report

Last week, the 650,000-barrels-per-day capacity Dangote refinery announced a temporary halt to its sale of petroleum products in naira, citing a mismatch between its sales revenue and crude purchase obligations, which are currently in US dollars.

“Our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received,” the refinery stated, justifying the shift to dollar transactions.

This move triggered an immediate rise in petrol loading costs at private depots in Lagos, climbing to about N900 per litre from less than N850 previously.

IPMAN’s National Publicity Secretary, Chinedu Ukadike, condemned depot owners for capitalizing on the situation by inflating prices. He urged marketers to avoid panic buying, predicting potential losses if Dangote eventually reduces prices once the issue is resolved.

“Some marketers are stockpiling PMS, expecting prices to soar. But if Dangote reverts the price, they could suffer heavy losses,” Ukadike warned.

He also revealed that discussions between the Federal Government and the refinery are ongoing to restore the naira-for-crude deal. Sources from the Federal Ministry of Finance and the Federal Ministry of Petroleum Resources confirmed that a Technical Sub-Committee on the policy is reviewing options for resuming the arrangement.

Insiders hinted that the deal’s suspension may not be permanent, attributing the setback to crude supply challenges at the Nigerian National Petroleum Company Limited (NNPCL). The company allegedly leveraged large volumes of its crude in forward sales to secure international loans, reducing its capacity to meet domestic demands.

Market analysts cautioned that the halt could strain the foreign exchange market, with petroleum marketers scrambling for US dollars to purchase products. Some speculated that this move might be aimed at curbing Dangote Refinery’s growing influence, as its price cuts had previously pressured competitors and importers.

The ripple effect of the suspension has already been felt at private depots, where prices surged in anticipation of further hikes. Industry observers noted that the federal government’s silence on the matter has only fueled speculation.

As talks between the government and Dangote resume, stakeholders remain hopeful for a resolution that stabilizes prices and supports Nigeria’s energy security.