The Federal Government of Nigeria is set to deliver up to 400,000 barrels of crude oil daily to the Dangote Petroleum Refinery under a new naira-for-crude agreement.
This development, reported by Bloomberg on Monday, is expected to take effect over the next two months, with the refinery receiving a total of 24 million barrels between October and November 2024.
The naira-for-crude arrangement signals a significant shift in Nigeria’s oil industry. It is poised to reduce the country’s crude exports while enhancing the refinery’s capacity, transforming both the regional import-export market and local fuel supply.
This agreement follows the Federal Government’s recent announcement that the naira-for-crude deal had commenced, and the Nigerian National Petroleum Company Limited (NNPC) is expected to begin supplying crude oil to Dangote Refinery this week.
Three additional refineries are also preparing to begin production of Premium Motor Spirit (PMS), better known as petrol.
Analysts predict that Dangote’s reliance on local crude will tighten the West African oil market, potentially reducing Nigeria’s exports below 1 million barrels per day.
The 650,000-barrel-a-day refinery, the largest in Africa, is expected to claim 13 to 14 cargoes from Nigeria’s monthly program, which typically consists of around 50 shipments.
The refinery is currently operating at 60-70% capacity, with full production expected in the coming months.
As the Dangote refinery ramps up its operations, Nigeria may reduce its costly reliance on imported petroleum products. According to experts, the local market for gasoline and diesel imports could shrink rapidly as a result.
The deal also positions the NNPC as the sole distributor of gasoline produced by the Dangote Refinery, a move that could significantly alter Nigeria’s domestic fuel market and further stabilize supply.
This initiative could help Nigeria achieve its long-term goal of reducing dependence on foreign oil products, while creating a more self-sufficient and efficient local energy sector.