Fresh concerns have emerged over a possible petrol price increase and renewed naira pressure following reports that Dangote Petroleum Refinery may begin selling refined products in U.S. dollars amid shortfalls in its naira-for-crude arrangement with NNPC.
Fresh concerns have emerged over a possible increase in petrol prices and renewed pressure on the naira following reports that Dangote Petroleum Refinery may begin selling refined petroleum products in U.S. dollars.
The development comes amid renewed tensions in the Middle East, which have pushed global crude oil prices higher and raised fears of supply disruptions in the international energy market.
Industry analysts say that if implemented, dollar-denominated sales by Africa’s largest refinery could significantly affect fuel pricing, foreign exchange demand and inflation in Nigeria, at a time when the Federal Government is seeking to ensure domestic fuel prices reflect international crude movements.
According to Daily Trust, sources familiar with the matter attributed the refinery’s reported plan to uncertainties surrounding the naira-for-crude arrangement between the Nigerian National Petroleum Company Limited (NNPC Ltd.) and Dangote Refinery, an initiative designed to let the refinery buy local crude in naira and reduce forex dependence.
However, industry sources said crude supplies under the arrangement have fallen short of the refinery’s operational needs, forcing it to rely more on internationally sourced crude purchased in dollars.
One source, who spoke on condition of anonymity, warned that selling products in naira while buying crude largely in dollars exposes the refinery to exchange-rate risks.
“If marketers continue buying in naira while the refinery purchases crude in dollars, exchange-rate losses become inevitable whenever the naira weakens,” the source said.
Analysts say a shift to dollar sales would require independent marketers to source forex before purchasing products, raising operating costs that could ultimately be passed on to consumers through higher pump prices, especially if the naira depreciates further.
Economists also warn that increased dollar demand from marketers could pile more pressure on Nigeria’s foreign exchange market.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), cautioned against premature conclusions, saying, “It’s still too early to conclude because we are yet to hear an official position from Dangote Refinery.”
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