NNPC in talks to extend crude oil supply contract with Dangote refinery! Nigeria’s state oil company, Nigerian National Petroleum Corporation (NNPC), has begun discussions with Dangote Oil Refinery to extend their existing contract for supplying crude oil in naira, the company has confirmed.
The original six-month agreement, signed in October 2024, is set to expire later this month. The initiative was introduced after local refineries—including Dangote’s $19 billion facility—struggled to secure crude oil supplies. By allowing the purchase of crude in local currency, the deal aimed to alleviate supply chain issues and ensure steady production at refineries.
Impact of the Initial Agreement
Under the current arrangement, NNPC has supplied 48 million barrels of crude oil to the Dangote Oil Refinery, one of the largest refining projects in Africa.
The agreement initially included plans to supply seven other smaller refineries, but in the end, only the Dangote refinery benefited from the arrangement. However, even Dangote did not receive the full crude volume that was initially agreed upon.
Dangote refinery
Despite these challenges, NNPC has confirmed that negotiations are underway to establish a new contract.
“Discussions are ongoing towards a new contract,” NNPC said in a statement.
Details of the New Deal Still Unclear
While talks have commenced, the specific terms of the new contract—including volume, pricing, and duration—have yet to be disclosed.
Key industry players are watching these negotiations closely, as the outcome will have significant implications for Nigeria’s oil sector.
Why This Deal Matters
The NNPC’s contract with Dangote Oil Refinery is part of Nigeria’s broader strategy to boost local refining capacity and reduce dependence on imported petroleum products.
Historically, Nigeria has relied heavily on imported fuel despite being one of the world’s top oil producers. The lack of refining capacity has led to fuel shortages, high costs, and reliance on foreign refineries for processed petroleum products.
The Dangote refinery, which has a refining capacity of 650,000 barrels per day, is seen as a game-changer for Nigeria’s energy sector. If fully operational, it has the potential to meet the country’s fuel demands and even export refined petroleum products to neighboring countries.
However, securing a steady crude oil supply remains a key challenge for the refinery’s full-scale operation.
Challenges Facing the Agreement
1. Crude Supply Constraints
Despite the agreement with NNPC, the Dangote refinery has struggled to receive the promised crude volumes. This has delayed full operations and affected fuel production levels.
2. Exchange Rate Volatility
One of the major motivations behind the naira-based crude supply deal was to reduce reliance on foreign exchange for crude purchases. However, the continued fluctuations in the naira’s value present a challenge in pricing crude oil competitively.
3. Involvement of Other Refineries
The initial contract was meant to benefit multiple local refineries, but only Dangote has received crude under the deal. Industry stakeholders are pushing for a revised agreement that would ensure fair access to crude oil for other local refineries.
4. Pricing and Contract Terms
The pricing structure and payment terms of the extended contract will be a crucial factor. If the agreement favors local refiners with affordable crude supplies, it could encourage more private investments in Nigeria’s refining sector.
What’s Next?
As discussions between NNPC and Dangote Refinery continue, industry experts are keen to see whether the new contract will:
✅ Ensure a more reliable supply of crude oil to local refiners.
✅ Include other refineries in the agreement.
✅ Provide favorable pricing terms for local refining.
✅ Help stabilize Nigeria’s fuel supply and reduce reliance on imports.
If a new deal is successfully negotiated, it could be a significant step toward achieving Nigeria’s goal of self-sufficiency in fuel production. However, the success of the arrangement will depend on NNPC’s ability to supply crude consistently and Dangote Refinery’s operational capacity.
For now, stakeholders await the final terms of the new agreement, which will likely shape the future of Nigeria’s refining industry.
