Oil loans disrupt Nigeria’s naira-for-crude deal – Businessday NG

…Discussions are ongoing, says NNPC

A controversial naira-for-crude arrangement between the Nigerian government and refiners, including the giant Dangote Refinery, has hit a brick wall due to the impact of oil-backed loans on the country’s crude oil production.

The naira-for-crude deal is designed to supply domestic refiners with crude oil in exchange for naira payments. With the deal now stalled, local refineries will rely on international suppliers for feedstock, gulping huge costs in dollars.

Multiple sources told BusinessDay that the Nigerian National Petroleum Company Limited (NNPC) has been unable to meet its crude oil supply obligations to local refineries due to its focus on servicing oil-backed loans.

Read also: Crude-for-naira sales was a 6-months agreement, NNPC clarifies

These loans, which are tied to future crude oil production, have taken precedence over domestic supply commitments, leaving refineries like Dangote and others scrambling for feedstock.

“The loans have taken precedence, and there’s simply not enough crude to go around,” said an industry insider who requested anonymity.

A source said the NNPC has notified Dangote Petroleum Refinery and other local refiners that it will no longer provide crude oil to them, as it has forward-sold all of its crude supplies until 2030.

Another source said at a time when Nigerians are hoping for further price reductions, “the NNPC unilaterally decided to end the naira-for-crude initiative.”

NNPC position

The NNPC on Monday clarified its stand about the crude for naira sales arrangement, stating that the contract for the sale of crude oil in naira was structured as a six-month agreement and subject to availability.

Olufemi Soneye, chief corporate communications officer of NNPC, responding to BusinessDay reports on the termination of the contract with Dangote refinery on Monday, said the contract for the sale of crude oil in naira expires at the end of March 2025.

He said, “NNPC Limited has noted recent reports circulating on social media regarding the alleged unilateral termination of the crude oil sales agreement in Naira between NNPC and Dangote Refinery.

“To clarify, the contract for the sale of crude oil in Naira was structured as a six-month agreement, subject to availability, and expires at the end of March 2025.”

He explained that discussions are currently ongoing towards a new contract, noting that under this arrangement, NNPC has made over 48 million barrels of crude oil available to Dangote Refinery since October 2024.

According to him, in aggregate, NNPC has made over 84 million barrels of crude oil available to the refinery since its commencement of operations in 2023.

“NNPC Limited remains committed to supplying crude oil for local refining based on mutually agreed terms and conditions,” he said.

Read also: NNPC suspends naira-for-crude deal for Dangote, others

Oil loans in spotlight

Experts argue that the NNPC has already committed its crude oil production to forward contracts, leaving no supply available for domestic refineries.

Africa Intelligence, a French-based publication, reported that the NNPC had finalised a fresh $2 billion loan to balance its finances and invest in new oil installations to raise crude oil production.

Nigeria’s Oando group, which is headed by Adewale Tinubu, and the Abu Dhabi National Oil Company (ADNOC), are among the parties financing the loan.

However, the Africa Intelligence report noted that Oando and ADNOC declined to comment when contacted.

As for the NNPC, it told Africa Intelligence that “at this stage, it is premature to discuss or disclose details regarding any deal that has not been finalized.”

BusinessDay’s findings showed NNPC pledged 272,500 barrels per day of crude oil through a series of crude-for-loan deals totalling $8.86 billion.

By pledging 272,500 barrels daily, it means that about 8.17 million barrels of crude will be used for different loan deals by the national oil firm monthly.

An analysis of a report by the Nigeria Extractive Industries Transparency Initiative (NEITI) and the NNPC’s financial statements showed under these deals, notable projects include: Project Panther, Project Bison, Project Eagle Export Funding (Original, Subsequent, and Subsequent 2 Debts), Project Yield, and Project Gazelle.

The NNPC has already fully repaid $2.61 billion in loans, representing 29.4 percent of the total credit facility, while $6.25 billion or 70.6 percent, remains outstanding.

Also, out of the $8.86 billion credit facility, only about $6.97 billion has been received from seven crude-for-loan deals.

Dangote not getting enough

The Dangote Refinery, Africa’s largest refinery with a capacity of 650,000 barrels per day, has been particularly affected.

Despite its potential to transform Nigeria’s energy landscape, the refinery has faced delays in securing consistent crude oil supplies, hampering its operations.

According to the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Dangote refinery is expected to process 550,000 barrels per day and 17.05 million barrels per month during the first half of 2025.

Read also: NNPC signs 80mmscf/d gas supply deal with Ssonic Petroleum for 20 years

However, data seen by BusinessDay under the naira-for-crude arrangement showed the refinery is only allocated 61,290 barrels per day for February 2025.

For the entire month of February, the refinery has been assigned 6.5 million barrels, but this allocation has dropped to 4.75 million barrels for March. Out of the 4.75 million barrels, only 1.9 million barrels are designated for purchase in naira, with the remaining barrels to be bought in US dollars.

“We need 650,000 barrels per day. The state oil firm agreed to give a minimum of 385,000 bpd but they are not even delivering that,” Edwin Devakumar, vice-president of Dangote Industries Limited, (DIL) had said last year.

While Devakumar declined to give specific figures, he described the NNPC’s supply as ‘peanuts.’