Nigerians may soon face 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.

According to sources, NNPC has stopped the arrangement, leaving local refineries to source crude in dollars, a move that could put additional pressure on the naira. The naira-for-crude deal, which began on October 1, 2024, allowed local refineries to receive crude oil from NNPC in exchange for naira, rather than dollars.

However, NNPC has now informed refineries that it has forward-sold all its crude, possibly to secure immediate funding, repay debts, or fulfill contractual obligations. This means that NNPC has already sold future crude production in advance, leaving local refineries to find alternative sources of crude oil.

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, failing to deliver the agreed-upon minimum of 385,000 barrels per day. The refinery has not officially commented on NNPC’s decision, but an official stated that the company will carefully evaluate its options before determining its next course of action.

The halt of the naira-for-crude deal could have significant implications for Nigeria’s energy sector and the broader economy. With local refineries forced to source crude in dollars, production costs are likely to increase, leading to higher fuel prices for Nigerians. This could further exacerbate the country’s economic challenges, including inflation and currency fluctuations.

While NNPC has not made an official statement on the recent development, multiple sources have confirmed that the initiative will remain suspended until 2030. The move raises questions about the long-term viability of Nigeria’s energy sector and the government’s ability to support local refineries.

In the context of Nigeria’s energy landscape, this development is particularly significant. The country is set to welcome three new refineries as the petroleum industry targets a 140,000 BPD expansion. However, the halt of the naira-for-crude deal could undermine these efforts and create uncertainty for investors and stakeholders.

As Nigeria navigates this latest development, it remains to be seen how the government and local refineries will respond to the challenges posed by the halt of the naira-for-crude deal. One thing is clear, however: Nigerians may soon face another surge in petrol prices, adding to the country’s economic woes.