Nigeria's bold initiative to price crude oil in naira for local refineries has faced considerable challenges merely two months after its introduction.

The strategy, championed by the Nigerian National Petroleum Company (NNPC), aimed to bolster the nation's dollar reserves and guarantee an adequate crude supply for domestic refining.

Naira-for-crude strategy faces major setbacks

Last month, the ministry of finance stated that the crude-for-aira deal had
already started as planned on October 1, 2024.

However, the plan seems to be struggling, as key stakeholders, including the Dangote Oil Refinery, reportedly receive far less than initially pledged.

Edwin Devakumar, Executive Director of the Dangote Refinery, has revealed that the NNPC pledged to supply 385,000 barrels per day (bpd) to the refinery’s 650,000-bpd facility but has fallen short of even this reduced commitment.

Labelling the deliveries as “peanuts,” Devakumar underscored the difficulties of unreliable domestic supply chains.

At the same time, refineries affiliated with the Crude Oil Refinery-owners Association of Nigeria (CORAN) report being completely left out of the naira-based crude supply initiative, with ongoing negotiations with the government to address the issue.

As a result of these supply challenges, the Dangote Refinery has turned to the international market, recently securing 2 million barrels of U.S. WTI Midland crude.

According to Oilprice, while this underscores the refinery’s global competitiveness, it also highlights the inefficiencies in Nigeria’s domestic crude distribution system.

As Nigeria’s largest refinery approaches its target of achieving 85% operational capacity by year-end, its challenges highlight deeper systemic problems within the country’s energy sector.

Without a dependable crude supply, the aspiration for a self-sufficient refining industry—led by the Dangote refinery—risks becoming yet another unfulfilled dream in Nigeria’s complex oil economy.