The Nigerian National Petroleum Company (NNPC) has announced the suspension of naira payments for crude oil purchases by local refineries, a decision that has sparked widespread discussion and concern across the country.
But what exactly does this mean, and how does it affect the average Nigerian?
In October 2024, the NNPC introduced a policy allowing Nigerian refineries, including the Dangote Refinery, to pay for crude oil in naira instead of dollars. This arrangement was designed to last for six months, from October 2024 to March 2025. It explains why you saw the news in March.
Something you must note in this agreement is that a significant portion of Nigeria’s crude oil has already been sold in advance to international buyers. This means that much of the crude being extracted today is fulfilling pre-existing contracts rather than being available for local refineries. The revenue from these pre-purchased deals has been used to fund refinery repairs and upgrades.
There’s even a plot twist:
Recent data indicates that the Dangote Refinery has been importing crude oil from the U.S.
A closer look at the data shows that a portion of Nigeria’s crude supply still comes from outside Nigeria.
- The white part shows the amount of crude bought from the US.
- The white part shows the amount of crude bought from Nigeria.
- The blue part shows the part of crude bought ordered from the US but yet to arrive.
Experts predict an upturn of events in the coming months that will distort the ratio of crude bought from outside Nigeria.
The impact of this shift will be significant with refineries now required to pay in dollars. What this means is that the demand for foreign currency will rise which will put immense pressure on the naira. As the naira weakens against the dollar, the cost of goods and services in Nigeria will likely soar, leading to inflation and higher living expenses for the average citizen.
What’s the way forward? Stick around.
