A circulating report has revealed that the naira-for-crude agreement between the Nigerian National Petroleum Company Limited (NNPC) and Dangote Refinery has suffered a significant setback. The oil company has, however, kicked against it, clarifying that the arrangement, enacted in October 2024, was set up as a six-month contract that was subject to availability and valid until March 2025. The oil firm stated that discussions are underway for a potential new agreement, but details of the new contract, including pricing, volume, and timeframe, are yet to be disclosed.
It further reaffirmed its commitment to providing crude oil for local refining based on the parameters agreed upon by both parties. This official announcement dispels prior reports that the significant setback on the naira-for-crude agreement with local refiners, notably the 650,000-barrel-per-day Dangote Refinery, was due to the NNPC’s responsibilities to repay oil-backed debts. As per the reports, NNPC has informed Dangote Refinery and other nearby refineries that it will no longer be able to supply crude oil after forward-selling all of its available crude until 2030.
Nigeria’s crude oil-backed loan commitments mount.
According to reports, NNPC has committed 272,500 barrels per day, or around 8.17 million barrels per month, under a total of $8.86 billion in crude-for-loan agreements. Only $6.97 billion has been received thus far, and $6.25 billion is still owed. It was stated that NNPC has only paid back $2.61 billion of the total. Among the initiatives supported by these loans are Project Panther, Project Bison, Project Eagle Export Funding (Original, Subsequent, and Subsequent 2 Debts), Project Yield, and Project Gazelle.
In December 2024, it was reported that NNPC seeks to raise $2 billion through a syndicated Loan secured by crude oil under the Project Leopard initiative, of which the first $1 billion has already been completed. It was mentioned that Oando Group and other oil businesses are being considered for the financing facility by NNPC, which already has a $3.3 billion oil-backed loan through a pan-African bank called Afreximbank. Upon implementation in October, the naira-for-crude agreement enabled local refiners to purchase crude oil with naira.
Shortfall in crude allocation raises concerns for Dangote refinery.
Under this agreement, over 48 million barrels of crude oil from NNPC Ltd. to Dangote Refinery. Overall, more than 84 million barrels of crude oil have been made available to the refinery by NNPC Ltd. since it started operation in 2023. Notwithstanding its scale and capacity to revolutionize Nigeria’s gasoline market, the Dangote Refinery has had difficulty obtaining a steady supply of crude. The Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) estimates that in the first half of 2025, it will process 550,000 barrels per day, or 17.05 million barrels per month.
However, it was only assigned 61,290 barrels per day and 6.5 million barrels for the entire month of February under the naira-for-crude allocation. With only 1.9 million barrels available for purchase in naira, this is expected to further decline to 4.75 million barrels in March. Edwin Devakumar, vice president of Dangote Industries Limited, claimed that NNPC is falling well short of its earlier pledge of at least 385,000 barrels per day. He highlighted the growing discrepancy between refinery demands and actual delivery by referring to the supply as “peanuts,” though he would not provide precise numbers.
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While NNPC has affirmed its commitment to continue discussions on the renewal of the naira-for-crude agreement, uncertainty still looms over whether a new deal will be reached. The possibility of reaching a new agreement remains unclear, as financial constraints, the oil-backed debts, and inconsistent crude supply pose significant challenges. With refineries like Dangote struggling to meet their production targets, the industry is left facing a precarious future unless a viable agreement is reached. The outcome of ongoing talks remains crucial for Nigeria’s oil and refining sector, but for now, a clear resolution remains uncertain.