Dangote Refinery has officially transitioned its refined product sales from the Nigerian naira to the United States dollar, effectively ending the naira-for-crude payment arrangement established in October 2024. According to a notice from the refinery’s Group Commercial Operations, all previously issued naira-denominated Proforma Invoices and Deal Recaps are now invalid, as the facility moves to a dollar-based pricing model to mitigate exchange-rate risks.
Impact of the Dollar-Based Pricing Shift
The refinery’s shift to dollar pricing marks a significant change for marketers and the broader downstream sector. Under the new schedule, Automotive Gas Oil (diesel) is priced at $1.087 per litre, while Aviation Turbine Kerosene (ATK) is set at $0.942 per litre. For petrol, coastal deliveries are now benchmarked at $1,044.62 per metric tonne, according to the official notice.
Industry sources indicate that the move was necessary to address a widening disparity between the currencies used to procure crude oil and those used to sell finished petroleum products. While the Nigerian National Petroleum Company Limited (NNPCL) has increasingly billed crude supplies in dollars, the refinery faced potential losses by selling its output in naira, leaving it exposed to volatile exchange-rate fluctuations.
Pro Tip: Retail fuel prices for the end consumer are not solely dictated by the refinery’s gate price. Costs remain subject to a combination of variables, including local transportation logistics, government taxes, and individual marketer margins.
Future of the Naira-for-Crude Strategy
This transition raises questions about the long-term viability of the government’s naira-for-crude initiative, which was originally intended to reduce pressure on foreign exchange demand and stabilize domestic fuel prices. The refinery had previously signaled friction regarding the arrangement as early as March of the previous year, when it noted potential constraints on fuel delivery to the Nigerian market due to unresolved exchange-rate concerns.
Despite the move to dollar pricing for most products, the refinery confirmed that the policy does not apply to Liquefied Petroleum Gas (LPG). LPG will continue to be traded under the existing payment arrangement, providing a point of stability for that specific segment of the market.
Did you know? The naira-for-crude plan was originally launched in October 2024 as a strategic policy to boost local refining capacity and minimize the need for the country to spend scarce foreign currency on imported fuel.
Frequently Asked Questions
- Why did the refinery switch to dollar pricing?
The refinery cited an imbalance between the cost of purchasing crude oil in dollars and the revenue generated from selling products in naira, which exposed the business to significant exchange-rate risks. - Are all transactions affected by this change?
No, the refinery clarified that the new dollar-based pricing does not affect Liquefied Petroleum Gas (LPG), which remains under the previous payment terms. - Does this mean pump prices will automatically rise?
Not necessarily. While the refinery’s gate price is now dollar-denominated, retail prices are influenced by multiple factors, including transportation costs, taxes, and dealer margins.
How do you think this shift will affect the local energy market in the coming months? Share your thoughts in the comments below or subscribe to our weekly energy newsletter for updates on downstream policy changes.
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