The Dangote Refinery has expressed concerns about the Nigerian government’s inability to meet its crude oil supply commitments under the Naira-for-crude arrangement. According to the refinery, the Nigerian National Petroleum Company Limited (NNPCL) has fallen short of its promise to deliver the agreed quantities of crude oil, significantly affecting the refinery’s ability to operate at optimal capacity.
In a recent interview with Reuters, Devakumar Edwin, Vice President of Dangote Industries Limited, disclosed the challenges the refinery is facing under this deal. He described the amount of crude supplied by the NNPCL as negligible, calling it “peanuts” compared to what is needed to produce refined petroleum products at scale.
Edwin highlighted the gap between the refinery’s requirements and the actual supply from NNPCL. Dangote Refinery, a $20 billion project, is designed to process 650,000 barrels of crude oil per day. However, under the Naira-for-crude deal, NNPCL had committed to delivering at least 385,000 barrels per day. According to Edwin, this target has not been met since the programme began in October 2024.
“We need 650,000 barrels per day to run the refinery at full capacity. NNPCL agreed to supply a minimum of 385,000 barrels per day, but they are not even delivering that,” Edwin said. This shortfall has forced the refinery to look for alternatives to maintain production levels.
The Naira-for-crude deal is an arrangement between the Nigerian government and the Dangote Refinery. The initiative was introduced as a way to secure a steady supply of crude oil to the refinery while providing a means for the government to pay for the crude in local currency, the Naira. This arrangement was expected to reduce Nigeria’s reliance on imported petroleum products and boost local refining capacity.
The government announced the implementation of this programme in October 2024, presenting it as a solution to Nigeria’s long-standing challenges in the downstream oil sector. The Dangote Refinery, the largest single-train refinery in the world, was seen as a key player in addressing these challenges and meeting domestic fuel demand.
Faced with the shortfall from the NNPCL, Dangote Refinery has reportedly resumed sourcing crude oil from the United States to keep its operations running. This move underscores the challenges of relying on local supply under the current arrangement. The refinery’s reliance on imported crude increases its operating costs, making the Naira-for-crude deal’s failure a significant setback for both the refinery and Nigeria’s broader economic goals.
The inability of NNPCL to meet its supply commitments has broader implications for Nigeria’s economy. The Dangote Refinery was expected to reduce Nigeria’s dependence on imported fuel, save foreign exchange, and create jobs. By processing crude oil locally, the refinery could also help stabilize fuel prices and make petroleum products more affordable for Nigerians.
However, the current challenges suggest that these goals might be difficult to achieve in the short term. The refinery’s reliance on imported crude raises concerns about the sustainability of its operations and the overall effectiveness of the Naira-for-crude programme.
The situation has sparked calls for greater accountability and transparency in the implementation of the Naira-for-crude deal. Industry experts argue that the Nigerian government and NNPCL must address the supply challenges to ensure the success of the Dangote Refinery and other similar projects.
For Dangote Refinery, securing a consistent and adequate supply of crude oil is essential for achieving its objectives. The refinery’s success is also crucial for Nigeria, given its potential to transform the country’s oil and gas sector and drive economic growth.
As the Dangote Refinery navigates these challenges, the Nigerian government and NNPCL face mounting pressure to deliver on their promises. The success of the Naira-for-crude deal hinges on the government’s ability to fulfill its supply commitments, support local refining capacity, and foster a more stable and self-reliant oil industry.
For now, the Dangote Refinery continues to explore alternative solutions, but the long-term success of the project will depend on effective collaboration between the private and public sectors.
