Fuel Price Hike Looms As FG Suspends Crude Oil Sale To Dangote Refinery

Following the Dangote Petroleum Refinery’s suspension of petroleum product sales in naira, several filling stations have begun stockpiling Premium Motor Spirit (PMS), commonly known as petrol, in anticipation of a price increase.

Retailers are preparing for higher prices, projecting that the price of petrol will soon rise due to the Federal Government’s failure to continue crude oil sales to the refinery in local currency.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has urged retailers to avoid panic buying, warning that such actions could lead to substantial losses.

Last week, Dangote Refinery announced it had temporarily halted the sale of petroleum products in naira after talks between it and the Nigerian National Petroleum Corporation Limited (NNPCL) over a naira-for-crude deal collapsed.

The refinery, with a capacity of 650,000 barrels per day, expressed concerns over the mismatch between its sales proceeds and crude oil purchase obligations, which are currently denominated in US dollars.

“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 US dollars,” the refinery said in a statement.

“To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received. Therefore, we must adjust our sales currency to align with our crude procurement currency.”

Following the announcement, the cost of loading petrol at private depots in Lagos surged to approximately N900 per litre, up from less than N850 per litre before the news broke.

In an interview with The PUNCH on Sunday, IPMAN’s National Publicity Secretary, Chinedu Ukadike, expressed concern over profiteering by depot owners as some filling stations rush to stockpile fuel.

He noted that demand for petrol had risen significantly since Dangote’s announcement, prompting depot owners to raise their prices.

The downstream petroleum sector has been left in a state of uncertainty, with no official clarification yet from Dangote Refinery on how PMS sales will proceed. Despite this, some filling station owners are already purchasing fuel at higher prices, hoping to sell it at a profit once prices rise.

Ukadike condemned the actions of depot owners, warning that the ongoing price hikes could negatively impact the economy.

“Some depot owners are already increasing the price, but we are advising marketers not to panic-buy. When the Dangote refinery reverses the price, it could lead to significant losses for marketers,” he said.

He further cautioned that filling stations stockpiling fuel in anticipation of higher prices might face financial challenges if the price correction occurs.

“Marketers should be careful about overstocking fuel, as purchasing large volumes at inflated prices could lead to losses,” Ukadike added.

IPMAN’s spokesperson also disclosed that efforts are underway to resolve the disagreement between the Federal Government and Dangote Refinery, which is expected to resume naira crude sales.

“I’ve gathered that the Federal Government and Dangote Refinery are almost resolving this matter. The two parties are reviewing the naira-for-crude deal to continue crude sales in naira to the refinery,” Ukadike revealed.

Sources from the Federal Ministries of Finance and Petroleum Resources confirmed that the Technical Sub-Committee on the Naira-for-Crude Policy would reconvene to deliberate on the issue.

Insiders indicated that the transaction would not be permanently halted, but the Nigerian National Petroleum Corporation Limited (NNPCL) has been grappling with crude availability issues.

Industry experts warned that the halt in naira sales by Dangote Refinery could exert pressure on the foreign exchange market, as marketers would now need to purchase US dollars to acquire petroleum products. Furthermore, the failure of the naira-for-crude deal was linked to the NNPCL’s massive forward sale of crude oil, leaving the corporation with insufficient stock to meet domestic supply needs.

A spokesperson for the NNPC, Olufemi Soneye, confirmed that fresh negotiations were underway with Dangote Refinery to renew the naira-for-crude agreement.

“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 said.

The suspension of naira sales by Dangote Refinery means that marketers will now have to source dollars to purchase petrol from the facility.

The National Vice President of IPMAN, Hammed Fashola, warned that this situation could weaken the naira, which had recently gained stability.

Experts pointed out that the naira-for-crude arrangement had helped the Dangote Refinery lower petrol prices, which in turn pressured the NNPC to follow suit.

The stoppage of the agreement may be a strategic move to limit the influence of Dangote Refinery, which has faced accusations of monopolistic practices in the downstream sector.

Domestic crude oil refiners have criticized the suspension of the naira-for-crude deal, arguing that it undermines the efforts of all stakeholders to achieve energy security.

Eche Idoko, National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria, decried the decision, stating that it obstructs the goal of self-sufficiency in refining and energy security.

As part of efforts to alleviate the supply gap, seven vessels carrying a total of 115,000 metric tonnes of PMS are expected to arrive at Nigerian seaports between March 17 and 23. These shipments will be distributed through the Tincan port in Lagos, the Lekki Deep Seaport in Lagos, and the Calabar port in Cross River State, helping to stabilize fuel supply nationwide.