Words like suspension and termination have been used by a section of the media to describe a six-month contract billed to expire at the end of March 2025
A section of the Nigerian media was on Monday awashed with a report that the Nigerian National Petroleum Company Limited (NNPC Ltd) has suspended the naira-for-crude contracts with local refineries.
The report published by BusinessDay and a few online newspapers claimed that the said decision affected refiners, “including Dangote Refinery and other private operators.”
The decision, which took immediate effect, has, according to the report by BusinessDay, “sparked discussions about its implications for Nigeria’s energy sector and the broader economy.”
In the nine-paragraph report, the business focused newspaper interchangeably used the words suspension and termination of naira-for-crude arrangement, quoting some “economists (to) have warned that the suspension could have ripple effects on Nigeria’s economy.”
In a statement issued on Monday by its Chief Corporate Communications Officer (CCO), Olufemi Soneye, the NNPC Ltd., however, clarified that the contract expired and was not unilaterally suspended as claimed in the report.
What Really Happened
Check by Platforms Africa showed that the sale of crude oil in Naira, which started in October 2024, was structured as a six-month agreement, subject to availability.
Like all contracts with shelf lives, the contract is billed to expire at the end of March 2025.
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A deeper examination of the deal signed by the Group Chief Executive Officer if the NNPC Ltd and local refiners led by Dangote Refinery showed that it is a semantic misrepresentation to describe the state of the contract as suspension. It is actually an expiration that is subject to renewal.
Talks Ongoing
The statement by Soneye confirmed that discussions “are currently ongoing towards emplacing a new contract.”
Under this arrangement, NNPC, Soneye said, “has made over 48 million barrels of crude
oil available to Dangote Refinery since October 2024. In aggregate, NNPC
has made over 84 million barrels of crude oil available to the refinery since its commencement of operations in 2023.”
The Report by BusinessDay
The BusinessDay report reads; “Nigerian National Petroleum Company (NNPC) Limited has suspended the naira-for-crude oil swap deal with domestic refiners, including Dangote Refinery and other private operators.
“The decision, which took immediate effect, has sparked discussions about its implications for Nigeria’s energy sector and the broader economy.
“The naira-for-crude arrangement, 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.
“The termination of the agreement means that Nigerian refineries, including the much-anticipated Dangote facility, will now have to source crude oil from international suppliers, paying in dollars instead of naira. This shift is expected to escalate operational costs, potentially leading to higher fuel prices at the pump.
“According to sources familiar with the development, the NNPC informed local refiners that it has already committed its crude oil production to forward contracts, leaving no supply available for domestic refineries. This revelation comes despite reports that Nigeria’s crude output has increased since the deal first began.
“The suspension has raised concerns among industry stakeholders, particularly for the Dangote Refinery, which is poised to become one of Africa’s largest refining facilities.
“The refinery, owned by billionaire Aliko Dangote, has been a key beneficiary of the naira-for-crude deal, as it relies on locally sourced crude to meet its refining needs. Analysts fear the suspension could delay the refinery’s operational timeline and increase costs.
“Other private refiners, including Waltersmith Petroman and BUA Refinery, are also expected to feel the impact. The deal had provided them with a cost-effective way to secure crude oil feedstock, enabling them to compete with international players.
“Economists have warned that the suspension could have ripple effects on Nigeria’s economy. The naira has already faced significant pressure in recent months, and the removal of this dollar-saving mechanism could exacerbate the currency’s volatility.
Feedback By NNPC Ltd
Re: Clarification on the Naira Crude Contract Between NNPC Limited
and Dangote Refinery
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.
Discussions are currently ongoing towards emplacing a new contract.
Under this arrangement, NNPC has made over 48 million barrels of crude
oil available to Dangote Refinery since October 2024. 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.
Last line
It is clear that the contract, which is still running till the end of March, will expire while the parties involved will again be on the negotiation table. To refer to it as termination or suspension of contract will mean the section of the media in question is taking side, a move with high tendency to puncture the general integrity of the fourth estate of the realm.
Platforms Africa
