Dangote Refinery Halts Naira Transactions Amid Currency Disparities

In a move that underscores the growing economic challenges in Nigeria, the Dangote Petroleum Refinery has announced a temporary suspension of fuel sales in the local naira currency.

The decision, effective from March 19, 2025, stems from significant discrepancies between naira-denominated sales and dollar-based crude oil purchases, creating operational difficulties for Africa’s largest refinery.

Background and Reasons for the Suspension

With a capacity of 650,000 barrels per day, the Dangote Refinery is Nigeria’s most ambitious energy project, aimed at reducing the country’s dependence on imported refined petroleum products.

However, the refinery’s operations have been hampered by financial constraints related to currency volatility.

Previously, Dangote Refinery had a six-month agreement with the Nigerian government allowing it to purchase crude oil in naira.

However, delays in the agreed crude volumes and fluctuating exchange rates have created an imbalance in the company’s financial structure.

This forced the refinery to shift to dollar-based sales to ensure a steady supply of crude oil and sustain its operations.

Economic Impact and Price Concerns

The suspension of naira transactions is expected to have a ripple effect on Nigeria’s economy, potentially leading to increased petrol prices.

Analysts predict that the move will put additional pressure on the already weakened naira, as traders and importers scramble for US dollars to settle transactions.

According to economic experts, this decision may also affect the affordability of refined fuel in Nigeria.

The naira’s depreciation has already strained purchasing power, and the shift to dollar-denominated sales could exacerbate inflation and fuel scarcity in the long term.

Government Response and Possible Solutions

The Nigerian National Petroleum Corporation (NNPC) has responded by initiating discussions with Dangote Refinery to review and possibly renew the previous agreement that allowed crude oil purchases in naira.

The government is also exploring policy measures to stabilize the currency and improve the availability of crude oil to local refiners.

In a statement, an NNPC spokesperson emphasized the need for collaboration to sustain domestic refining capacity and ensure affordability for Nigerian consumers.

“We recognize the challenges facing the Dangote Refinery and are committed to finding a solution that supports both the refinery’s operations and the broader economy,” the spokesperson stated.

Potential Long-Term Consequences

This development raises concerns about the sustainability of large-scale industrial projects in Nigeria amid ongoing currency fluctuations.

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It also highlights the broader issue of Nigeria’s dependency on crude oil exports while struggling to refine and distribute petroleum products domestically.

Observers warn that unless currency stability is achieved and local refineries receive consistent crude supply, Nigeria may continue to face economic setbacks in the energy sector.

The coming weeks will be critical in determining how the government, private sector, and financial institutions address this crisis to prevent further economic strain.

For now, the Dangote Refinery’s decision remains a stark reminder of the complex interplay between currency policy, oil production, and national economic stability