The recent suspension of petroleum product sales in naira by the Dangote Petroleum Refinery has triggered concerns across Nigeria’s fuel market.
Many filling station operators are now stockpiling Premium Motor Spirit (PMS), commonly known as petrol, in anticipation of a possible price hike.
Retailers and marketers fear an imminent increase in fuel prices following the Federal Government’s failure to continue crude oil sales to the refinery in local currency. This development has fueled speculation that petrol prices could rise significantly, prompting some dealers to hoard supplies in hopes of making higher profits.
IPMAN Warns Against Panic Buying
Amid the growing uncertainty, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has cautioned against panic buying and hoarding. The association warned that excessive stockpiling of fuel could lead to financial losses, especially if prices eventually drop instead of rising.
Chinedu Ukadike, IPMAN’s National Publicity Secretary, expressed concerns that depot owners were already taking advantage of the situation by inflating prices. He advised marketers to exercise restraint, as premature price speculation could backfire.
Why Did Dangote Refinery Suspend Naira Sales?
The Dangote Petroleum Refinery, a 650,000-barrel-per-day facility, recently announced a temporary suspension of its naira-based petroleum sales. The company cited concerns over the imbalance between its revenue from sales in naira and its crude oil purchase obligations, which are denominated in U.S. dollars.
In an official statement, the refinery explained:
“We wish to inform you that Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are denominated in U.S. dollars.”
The refinery further clarified that its sales in naira had exceeded the crude oil supplied to it in local currency. As a result, adjusting its sales model was necessary to align with crude procurement costs.
Fuel Prices Surge at Private Depots
Following the announcement, the price of loading petrol at private depots in Lagos soared from under N850 per litre to approximately N900 per litre. This spike reflects growing anxiety in the market, with retailers scrambling to secure supplies before potential further increases.
Industry insiders have noted that the suspension of naira sales by Dangote Refinery could put additional pressure on Nigeria’s foreign exchange market. If marketers are forced to source dollars to buy petrol, demand for foreign currency will rise, potentially leading to further naira depreciation.
Government and NNPC Seek Resolution
Efforts are underway to resolve the standoff between Dangote Refinery and the Federal Government. Ukadike revealed that discussions were ongoing to reinstate the naira-for-crude arrangement, allowing the refinery to resume local currency transactions.
Sources from the Ministries of Finance and Petroleum Resources confirmed that the Technical Sub-Committee on the Naira-for-Crude Policy would soon reconvene to address the matter. Insiders suggested that while the suspension of naira transactions was temporary, the Nigerian National Petroleum Corporation Limited (NNPCL) had been struggling to meet domestic crude supply obligations due to prior forward sales of crude oil.
NNPC spokesperson, Olufemi Soneye, disclosed that fresh negotiations were in progress to renew the agreement with Dangote Refinery.
“We have already supplied 48 million barrels of crude to Dangote Refinery since October. We are working on renewing the agreement as the first phase concludes this month,” Soneye stated.
Potential Implications for the Economy
The halt in naira-based transactions could have broader economic consequences. Industry experts warn that the move may trigger volatility in petrol prices, disrupt fuel supply chains, and further strain the exchange rate.
Hampered by the shift, independent marketers may pass increased costs onto consumers, leading to higher transportation expenses and inflationary pressures across the economy. The National Vice President of IPMAN, Hammed Fashola, cautioned that the weakening naira could worsen, as more petroleum marketers turn to the parallel market for foreign exchange.
Dangote Refinery’s Strategic Position and Industry Response
The decision by Dangote Refinery has sparked debate over its market influence. Some industry observers speculate that the company’s shift in pricing strategy could be a strategic move to consolidate its dominance in the downstream sector. Competitors, including other domestic refiners, have expressed concerns that suspending the naira-for-crude deal could hinder national energy security goals.
Eche Idoko, National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria (CORAN), criticized the policy shift, stating:
“This decision undermines efforts to achieve self-sufficiency in refining and energy security. Local refiners should be encouraged to operate sustainably without excessive dependence on foreign exchange transactions.”
Supply Relief on the Horizon?
To mitigate the impact of the refinery’s pricing shift, authorities are facilitating additional fuel imports. Reports indicate that seven vessels carrying a total of 115,000 metric tonnes of PMS are scheduled to arrive at Nigerian ports between March 17 and 23. These shipments will be distributed through key seaports, including Tincan Port (Lagos), Lekki Deep Seaport (Lagos), and Calabar Port (Cross River State), in a bid to stabilize supply.
Conclusion
As negotiations continue, stakeholders in the oil and gas sector remain on edge, awaiting a resolution to the ongoing dispute. Whether Dangote Refinery resumes sales in naira or sticks to its dollar-based model, the impact on fuel prices, forex markets, and economic stability will be closely monitored in the coming weeks.
