President Tinubu backs Africa’s richest man; NNPC to sell crude in Naira to Aliko Dangote’s refinery

Omokolade Ajayi -

Key Point

  • President Tinubu’s directive to sell crude to Dangote Refinery in Naira aims to stabilize fuel prices and the exchange rate.
  • Federal Executive Council supports crude oil sales in Naira to Dangote and other refineries to address fuel price fluctuations and Naira pressure.
  • Dangote Refinery, producing aviation fuel and diesel, aims to boost output to 550,000 barrels per day by year-end, targeting reduced sulfur levels in diesel.

Dangote Oil Refinery, owned by Aliko Dangote, Africa’s richest man, has received a crucial boost from the Nigerian government. President Bola Tinubu has directed the Nigerian National Petroleum Corporation (NNPC) Limited to sell crude oil to the $20 billion refinery in Naira, a move expected to stabilize both fuel prices and the dollar-Naira exchange rate.

FEC approves naira-based crude deal

This decision follows the Federal Executive Council (FEC) adopting President Tinubu’s proposal to sell crude to Dangote Refinery and other emerging refineries in Naira. The initiative aims to address concerns over fluctuating fuel pump prices and mitigate pressure on the Naira.

The refinery, which currently requires 15 cargoes of crude annually at a cost of $13.5 billion, will initially receive four cargoes from NNPC. The FEC’s approval includes offering 450,000 barrels, designated for domestic use, in Naira, using Dangote’s refinery as a pilot project.

Nigeria streamlines transactions, saves billions

This move is expected to fix the exchange rate for the duration of the transaction and eliminate the need for international letters of credit. Afreximbank and other Nigerian settlement banks will facilitate transactions between Dangote and NNPC, reducing the country’s dependency on imports and saving billions in the process.

Despite its anticipated roll-out of gasoline in August, the Dangote Refinery has faced operational hurdles, running at just over 50 percent capacity due to challenges in sourcing crude internationally. The refinery aims to reduce Nigeria’s reliance on imported fuel, potentially cutting foreign exchange expenditure by up to 30 percent.

Refinery output to reach 550,000 bpd

Operational since January, the refinery currently produces aviation fuel, naphtha, and diesel. Dangote counters claims of substandard diesel, highlighting lab tests showing sulfur at 87 ppm, versus over 1,800 ppm in imports. The target is to cut sulfur to 10 ppm by month-end.

With gasoline production set to begin in August, the refinery plans to boost output from 350,000 to 550,000 barrels per day by year-end, nearing its 650,000-barrel capacity. Most diesel is exported to traders like Trafigura, Vitol, BP, and TotalEnergies.