Nigeria's state-owned NNPC said it is in negotiations with the country's 650,000 b/d Dangote refinery about extending a local currency crude sales arrangement.
The six-month programme, which ends this month, has seen NNPC sell Dangote almost 300,000 b/d of crude in naira since October 2024, NNPC said. The programme has also involved Dangote selling gasoline and diesel to the domestic market in naira.
It has been "a good arrangement until now by reducing gasoline prices, national inflation and by stabilising the naira", according to sources familiar with the matter.
Dangote has relied heavily on NNPC's crude since starting up in late 2023. NNPC said it has sold over 84mn bl to the refinery in that time, and Vortexa data show domestically sourced oil accounted for more than 80pc of total crude deliveries to Dangote between January 2024 and February 2025, albeit some of it supplied by private upstream operators.
Under the six-month programme, crude prices are set in dollars and Dangote pays in the naira equivalent at a discounted exchange rate. The discounted rate partly explains why Dangote has made successive cuts to its domestic gasoline prices, according to market participants.
But there is no guarantee that NNPC will be willing to continue selling at a discount, given that the company is hemmed in by commitments to finance deals used to service its crude sales, a crude trader told Argus. There may also be constraints on the amount of crude the firm has available for domestic refiners, with some sources suggesting it has secured term supply deals up to 2030.
NNPC said crude sales under the programme were "subject to availability". The arrangement has evolved since it began. A source at NNPC told Argus that the programme started with Dangote being entitled to pay in naira for any of the first 10 cargoes loaded in a given month and in dollars for additional cargoes thereafter, but now NNPC offers some cargoes strictly for payment in dollars and others with the option of payment in naira.
Any further changes to the terms of the extended programme may put pressure on Dangote to consider increasing the amount of foreign crude in its slate. Refinery sources told Argus in January that the refinery will look to source at least half of its crude requirements on the import market and is building eight storage tanks to facilitate this.
Whatever terms are agreed, NNPC may have no choice but to continue offering crude to domestic refiners like Dangote under a right of first refusal set out in the country's Petroleum Industry Act, a crude trader said. Upstream regulator NUPRC's Domestic Crude Supply Obligation (DCSO) system came into force in May 2023 but it has been controversial, requiring the issuance of clarifying guidelines in July 2024 before changes were implemented last month.
According to the new rules, NUPRC will meet with domestic refiners each month before it gets together with upstream operators to review production and loading programmes. Commercial negotiations between producers and refiners must be completed or complaints lodged with the regulator within 48 hours of the upstream meeting.
In the short term, demand for Nigerian crude exports appears weak. Traders said around 12 March-loading cargoes were still searching for buyers as of 10 March and most of the April export schedule is available as well. Ample supply of more competitively priced Kazakh-origin light sour CPC Blend, US WTI and Mediterranean sweet crudes is weighing on demand for Nigerian grades in Europe, where the spring refinery maintenance season is about to get underway. This is pushing down values of April-loading Nigerian cargoes.
