Nigerians may soon experience another surge in petrol prices as the Nigerian National Petroleum Company (NNPC) Limited has reportedly halted its naira-for-crude deal with local refineries, including Dangote Refinery. This move could drive up production costs and ultimately lead to an increase in petrol pump prices for Nigerians.

The naira-for-crude deal, which began on October 1, 2024, allowed local refineries to source crude oil from NNPC in exchange for naira. However, sources reveal that NNPC has stopped the arrangement, leaving local refineries to source crude in dollars. This change could put additional pressure on the naira and lead to higher production costs.

According to sources, NNPC has informed refineries that it had forward-sold all its crude, possibly to secure immediate funding, repay debts, or fulfill contractual obligations. For example, in August 2023, NNPC secured a $3.3 billion emergency loan from Afreximbank to help stabilize Nigeria's foreign exchange market. This loan was structured as a crude-for-cash arrangement, meaning Nigeria committed to repaying the loan using future crude oil sales.

The crude-for-naira deal has faced challenges since its inception. By November 2024, Dangote Refinery revealed that NNPC was not holding up its end of the bargain. Edwin Devakumar, the vice-president of Dangote Industries Limited (DIL), stated that the company needed 650,000 barrels per day, but NNPC agreed to give a minimum of 385,000 bpd and was not even delivering that.

A high-level source confirmed that NNPC has informed Dangote Petroleum Refinery and other local refiners that it will no longer supply them with crude oil, as all its crude has been forward-sold until 2030. While the Dangote Refinery has not officially commented on NNPC's decision, an official stated that the company will carefully evaluate its options before determining its next course of action.

The implications of this decision could be far-reaching, with potential consequences for the Nigerian economy and the petroleum industry. The halt in the naira-for-crude deal could lead to increased production costs, which may be passed on to consumers in the form of higher petrol prices. This could have a ripple effect on the economy, potentially driving up inflation and affecting the overall cost of living.

As Nigeria continues to grapple with economic challenges, the halt in the naira-for-crude deal raises concerns about the country's ability to manage its energy resources and stabilize its economy. The move also highlights the need for Nigeria to diversify its economy and reduce its dependence on oil exports.

In conclusion, the halt in the naira-for-crude deal between NNPC and local refineries could have significant implications for the Nigerian economy and the petroleum industry. As the country navigates this development, it is essential to consider the broader implications and potential consequences for the economy and the people of Nigeria.