Fuel crisis looms as FG suspends sales of crude to Dangote Refinery

The suspension of naira-denominated petroleum product sales by the Dangote Petroleum Refinery has triggered panic buying and stockpiling of Premium Motor Spirit (PMS) by filling station owners,

Newstap correspondent who visited many fuel stations in the Federal Capital Territory, Abuja reports that many of them are now dispensing fuel from only one pump in anticipation of a price hike following the failure of the Federal Government to continue supplying crude oil to the refinery in local currency.

However, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has warned against panic buying, cautioning that marketers could suffer heavy losses if prices drop.
It would be recalled that last week, Dangote refinery announced a temporary halt in the sale of petroleum products in naira, citing a mismatch between its sales proceeds and crude oil purchase obligations, which are currently settled in U.S. dollars.

“Dear valued customers, we wish to inform you that the Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in naira.
“This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in U.S. dollars,” the company stated.

The refinery explained that the volume of naira-based petroleum sales had exceeded the crude oil it received in the local currency, prompting the adjustment.

Following the announcement, the cost of loading petrol at private depots in Lagos surged to about N900/litre, up from less than N850/litre. Depot owners were quick to increase prices amid rising demand.

In response, IPMAN National Publicity Secretary, Chinedu Ukadike, criticized depot owners for exploiting the situation, saying it was detrimental to the economy.

“Some depot owners are already increasing the price. But we are also asking our marketers not to be involved in panic buying. When Dangote refinery resumes naira sales and reverses the price, marketers with high stockpiles will suffer losses,” Ukadike warned.

He urged marketers to avoid buying large volumes at high prices to prevent financial difficulties if prices eventually drop.

Meanwhile, the Federal Government and Dangote refinery are reportedly working to resolve the impasse and resume the naira-for-crude deal.

“I was reliably informed that the Federal Government and Dangote refinery are almost resolving this matter. They are reviewing the naira-for-crude agreement to continue supplying crude in naira,” Ukadike disclosed.

A Technical Sub-Committee on the Naira-for-Crude Policy was set to reconvene on Monday to deliberate on options to restore the deal.

However, industry experts have cautioned that suspending naira sales could increase pressure on the foreign exchange market, as petroleum dealers would now need to source large amounts of U.S. dollars to purchase products.

Additionally, reports indicate that the Nigerian National Petroleum Company Limited (NNPCL) has committed a significant portion of its yet-to-be-produced crude oil to securing international loans, making it difficult to meet domestic supply demands

Some industry players allege that halting the naira-for-crude deal is a strategic move to weaken the Dangote refinery and reinstate full-scale fuel importation.

The National Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria, Eche Idoko, argued that suspending the deal undermines national energy security.

“This move goes against the efforts of stakeholders to achieve self-sufficiency in petroleum refining. It is a setback for the industry,” Idoko stated.

Meanwhile, fresh import shipments of PMS continue to arrive in Nigeria, with seven vessels carrying 154.22 million litres expected to berth between March 17 and 23 at Lagos and Calabar ports.

As negotiations between the Federal Government and Dangote refinery continue, stakeholders await clarity on the next steps for crude supply and fuel pricing.

With fuel importation and forex concerns mounting, the resolution of the naira-for-crude dispute will be crucial in determining the stability of the downstream petroleum sector in the coming weeks.