An impasse between Nigerian billionaire Aliko Dangote and the government threatens to push petrol prices higher and exacerbate the country’s cost-of-living crisis.
The Dangote Refinery’s suspension of naira-based sales has jolted Nigeria’s oil market, prompting petrol hoarding and price speculation. Officials hope to resolve the impasse between Aliko Dangote and the government soon, yet concerns over currency stability and looming inflation continue to unsettle businesses and consumers alike.
Why did the Dangote Refinery suspend its sale of petroleum products in naira?
According to the refinery, there was a mismatch between its naira-based sales proceeds and its crude oil purchase obligations, which must be settled in US dollars. The Nigerian National Petroleum Company (NNPC) had not delivered enough naira-denominated crude to cover Dangote’s local sales.
Fearing mounting losses, the refinery chose to halt naira transactions until it could resolve the discrepancy.
Why are some marketers hoarding fuel, and what risks do they face?
Many marketers see the suspension of naira-based sales as a signal that domestic pump prices could soon rise. By stockpiling Premium Motor Spirit, they aim to profit if prices jump in response to dollar transactions.
However, the Independent Petroleum Marketers Association of Nigeria has warned that a swift resolution could reverse any price hike, leaving those who overstocked with costly inventories. If Dangote reverts to more affordable pricing, marketers who hoarded fuel at premium rates could suffer heavy losses.
What impact could this have on the naira?
Moving from naira-based sales to dollar-based pricing can increase demand for forex. Marketers forced to buy crude or refined products in dollars will enter the forex market in greater numbers, potentially placing more strain on the naira.
If the naira weakens further, it can drive up inflation, since higher transport and production costs often feed into overall price levels for food and everyday goods.
How is the government responding to the situation?
Federal officials are scrambling to salvage the naira-for-crude arrangement. A technical subcommittee is reported to be reconvening to review how crude oil can again be sold in the local currency.
The government also wants to examine ways to manage its crude allocations, given that the NNPC has pre-sold large volumes of future oil production to satisfy loan obligations. There is a push to ensure that enough crude remains available for domestic refining – on terms that support the naira rather than weaken it.
Is there a chance that Dangote will resume sales in naira soon?
Negotiations are ongoing. The company has signalled its willingness to restart naira-based transactions if crude allocations are rebalanced and the mismatch between sales proceeds and dollar-denominated crude costs can be fixed.
Both Dangote and government insiders say the decision to suspend naira-based sales is not final. If fresh terms emerge and enough crude can be secured on locally denominated terms, the refinery may swiftly return to its original arrangement.
What broader effects could this have on Nigerians and the fuel market?
Fuel prices often shape inflation, transport costs and household budgets. A switch to dollar pricing, followed by potential hikes at the pump, could make life more expensive for everyone. Rising expenses for manufacturers and service providers also feed into higher costs for goods, putting further strain on businesses and consumers.
However, if the refinery and the government reach an agreement that keeps sales in naira at stable levels, it might ease public anxiety, avert major price spikes and protect people from a sharper cost-of-living squeeze.
What are the key points to watch in the coming weeks?
Many observers are paying close attention to any official announcement from the Dangote Refinery or the government. The size of the forward oil sales on the NNPC’s books will also come under scrutiny, given it may limit how much crude remains for domestic deals.
Industry experts hope that additional oil production from new or reopened fields could free up barrels for local refining. In the meantime, marketers and consumers alike face an unsettled market as nobody can predict exactly how long this standoff will last or how high prices may climb if dollar sales prevail.
