Despite a government arrangement designed to shield Nigeria from global oil price shocks, the Dangote Refinery has raised its depot price for petrol multiple times in recent days, with the Managing Director, David Bird, stating the plant does not receive discounted crude under the so-called naira-for-crude deal.
Bird, speaking in a media chat released via the company’s X account, defended the refinery’s pricing. He explained that the facility is fully exposed to international commodity markets, including volatile crude oil prices, soaring freight rates, insurance, and financing costs. He noted that crude oil prices have spiked dramatically, from the mid-$60s per barrel to nearly $120 within a week, directly impacting production costs.
The refinery clarified that even under the naira-for-crude initiative—where the Nigerian National Petroleum Company supplies crude in local currency—purchases are made at international benchmark prices. “Even under the crude-for-naira arrangement, Nigerian crude is purchased at international benchmark prices, meaning the refinery does not receive discounted crude,” Bird stated.
Freight costs have reportedly surged from approximately $800,000 to about $3.5 million per tanker shipment, further straining margins. The refinery, which operates at its 650,000 barrels-per-day nameplate capacity, maintains it will continue meeting Nigeria’s fuel demand, arguing that domestic refining provides critical supply security during global disruptions.
This situation highlights a fundamental challenge for Nigeria, an import-dependent nation. Bird stressed that such countries are “worst hit as the global oil crisis escalates.” The government’s naira-for-crude policy, launched in 2024, aimed to reduce foreign exchange pressure and stabilize local fuel prices by supplying the refinery with domestically produced crude. However, recent depot prices have climbed to N1,175 per liter from N799, sparking public concern over the cost of living.
The disconnect stems from the refinery’s inability to insulate itself from global market forces. While eliminating import dependency prevents foreign exchange shortages and queuing at stations, the final pump price remains tethered to international benchmarks and logistical costs. Dangote’s leadership asserts that without the refinery, Nigeria would face severe shortages, but the current escalation in global oil markets is passing through to local consumers.
The episode underscores the complexity of energy policy in oil-producing but refining-deficient nations. For Nigeria, the Dangote Refinery represents a strategic asset for supply security, yet it operates within a global system where local currency transactions for crude do not equate to a fixed or subsidized final product price. The company’s stance suggests further price adjustments may occur if international crude and freight costs remain elevated.
