The Nigerian National Petroleum Company Limited’s (NNPC) decision to halt crude deliveries to the Dangote refinery and other local plants in March contributed to a dip in oil output from the Organisation of the Petroleum Exporting Countries (OPEC), according to a new Reuters survey.
The survey revealed that OPEC’s collective output fell by 110,000 barrels per day (bpd) in March, with Nigeria, Iran, and Venezuela each accounting for a 50,000 bpd decline. In Nigeria’s case, the drop was attributed to “reduced deliveries to the Dangote refinery, offsetting higher exports,” Reuters reported.
Despite this decline, Nigeria is reportedly producing slightly above its OPEC quota.
Delayed Shipments and Disputed Terms
Sources told The PUNCH that NNPC delayed seven crude cargoes meant for the Dangote refinery last month due to unresolved payment terms. A report by S&P Global confirmed the delay, stating that the cargoes—totaling approximately 245,000 bpd or 7.2 million barrels for April—were stalled as both parties failed to finalize a payment agreement.
“According to trade sources and Nigerian port authorities, NNPC has allocated seven crude oil cargoes to deliver around 245,000 barrels per day to the Dangote site in April but is yet to agree on payment terms,” the S&P Global report noted.
Further findings suggest that the dispute stems from the apparent discontinuation of a naira-for-crude oil deal initiated in October 2024. The agreement was designed to help stabilize domestic fuel prices by allowing the Dangote refinery to pay for crude in naira instead of US dollars.
By March 10, NNPC had delivered only 280,000 bpd under the agreement, falling short of the 385,000 bpd initially agreed upon, according to S&P Global data.
A source familiar with the matter said credit facilities previously extended to the refinery have been withdrawn. Going forward, Dangote Refinery must now present letters of credit before receiving further crude allocations.
An NNPC official declined to comment, stating only, “Transactions are not done in the open.”
Deal in Limbo, Prices on the Rise
As the six-month naira-for-crude deal expired on April 9, uncertainty looms over its renewal. A Dangote executive expressed doubts about its continuation, noting that denominating crude contracts in dollars but selling refined products in naira has placed financial strain on the refinery.
“We are not even sure whether it will be renewed,” he said. “It’s become a drag on our operations.”
He explained that currency conversion risks and the pegging of prices to international benchmarks have left the refinery exposed to market volatility.
Following the expiration of the deal, fuel prices in Nigeria have climbed, compounding public concerns over inflation and energy affordability.
Wider Market Strains and Regional Dynamics
Beyond payment disputes, Nigeria’s broader oil sector is facing operational challenges, including instability and pipeline sabotage in Rivers State—further complicating output projections.
At the same time, Nigerian crude grades have seen weaker demand in the international market. According to Argus Media, the April trading cycle saw as many as 15 unsold Nigerian cargoes, as buyers turned to cheaper alternatives such as U.S. WTI, Caspian CPC Blend, and Mediterranean grades.
Meanwhile, the African Export–Import Bank (Afreximbank) has pledged $3 billion to help finance the purchase of refined products across Africa in a push to strengthen the continent’s refining infrastructure. Africa currently exports about 80% of its crude and 45% of its natural gas, making it heavily dependent on imported refined fuels.
According to Reuters, sub-Saharan Africa’s energy sector continues to suffer from limited storage capacity and aging refineries.
Oil Prices Slip, Budget Concerns Rise
Global crude prices also took a hit this week. Brent crude fell to $63.23 per barrel, while U.S. WTI dropped to $59.82. Analysts warn that the decline could severely impact Nigeria’s 2025 federal budget, which is based on a benchmark price of $75 per barrel.
However, others argue that falling oil prices may ease pressure on local fuel costs—if supply chains stabilize.