The Federal Government is preparing to supply up to 400,000 barrels of Nigerian crude oil per day to the Dangote Refinery as part of its newly launched naira-for-crude agreement, according to a Bloomberg report. This arrangement is set to begin in the coming weeks and will result in the delivery of 24 million barrels of crude oil between October and November 2024.
The deal represents a major shift in Nigeria’s oil landscape, potentially transforming the refinery’s operations and reshaping the region’s import-export dynamics. The Naira-for-crude initiative marks a new era for Nigeria’s oil industry, as the Nigerian National Petroleum Company Limited (NNPC) plans to commence crude oil supplies this week. Three other refineries are also set to start producing Premium Motor Spirit (PMS).
As the Dangote Refinery increases its reliance on local crude, this will significantly reduce Nigeria’s crude exports to the Atlantic oil market. The refinery, which is capable of processing 650,000 barrels per day—the largest in Africa or Europe—is expected to take 13 to 14 shipments from Nigeria’s typical monthly export of 50 cargoes. This could lead to a “substantially tighter” West African crude market in the fourth quarter, with Nigerian exports potentially dropping below 1 million barrels per day, according to FGE analyst Ronan Hodgson.
While some shipments may face delays, October’s scheduled volume surpasses the refinery’s previous intake of 255,000 barrels per day during the first half of the year. Currently, the Dangote Refinery is operating at 60-70% capacity and is expected to reach full output within months, according to Engineers India Ltd. Chairman Vartika Shukla.
The agreement also allows NNPC to act as the exclusive distributor of gasoline produced by the Dangote Refinery, further cementing the partnership. If the refinery continues to ramp up production, Nigeria may finally reduce its costly dependence on imported fuel products. FGE’s Hodgson predicts that as the refinery reaches full capacity, the West African market for gasoline and diesel imports could shrink rapidly.
Earlier this year, the Dangote Refinery imported millions of barrels of U.S. crude oil, but after re-selling some of it, the refinery shifted its focus back to local feedstock under the new agreement.
