The stalled negotiations between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refineries over the naira-for-crude deal have sparked concerns among market analysts, who warn that the collapse of the agreement could threaten liquidity in the foreign exchange market and undermine the country’s efforts to curb inflation.
The naira-for-crude contract, which was introduced on October 1, 2024, allowed local refiners to purchase crude oil in naira instead of dollars. The initiative was designed to support domestic refining capacity, reduce reliance on imported petroleum products, and stabilize the local currency by easing pressure on foreign exchange reserves.
However, with the termination of the agreement, Nigerian refineries, including the Dangote facility, will now have to source crude oil from international suppliers, paying in dollars instead of naira. This development is expected to increase demand for foreign exchange, putting pressure on the FX market.
According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation rate eased to 23.18% in February 2025, down from 24.48% in January 2025. However, experts warn that the discontinuation of the naira-for-crude contract could reverse this trend, given the contributory effect of energy costs on inflation.
Dr. Tayo Aduloju, CEO of the Nigerian Economic Summit Group, noted that the suspension of the deal would add pressure to the FX market, while Dr. Ayodeji Ebo, Managing Director of Optimus by Afrinvest, warned that the demand for FX could increase by 30-40% due to fuel importation.
Other experts, including Dr. Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, expressed concerns about the long-term outlook, noting that the naira-for-crude initiative had contributed to the stability of the naira in recent times.