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NNPC used domestic refineries to terminate the Naira to crude oil agreement and paid in US dollars.
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Analysts and economists say this could lead to higher volatility in fuel prices and naira.
The recent move by the Nigerian National Petroleum Corporation (NNPC) has only been restricted to suspending crude oil agreements in refineries such as the Dangote refinery, Bua refinery and other domestic refineries, sparking national controversy.
Most analysts warn that suspension could trigger high imports and high fuel costs.
Naira-For-For-For-For-For-For-For-For arrangements were proposed on October 1, 2024 to allow local refineries to purchase crude oil in Naira instead of US dollars.
The purpose is to support domestic refining, reduce dependence on imported petroleum products, and stabilize local currencies by alleviating foreign exchange reserve pressure.
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The suspension of the agreement means that local refineries in Nigeria, including the Dangote facility, will have to source crude oil from international suppliers. They will also pay in US dollars instead of in Naira.
It is presumed that this shift is an upgraded operating cost that could lead to a rise in fuel prices for the pump.
According to a source who launched the development online, NNPC has notified local refineries that it has put crude oil production into forward contracts and has no supply for domestic refineries.
Nigeria’s crude oil output has been reported to have increased since the trading first began, and this revelation is out of revelation.
The impact of the NNPC announcement will affect all domestic refineries, especially the Dangote refinery, which is the forefront of becoming one of Africa’s largest refining facilities.
Recall that the Dangote refinery owned by billionaire Aliko Dangote has been a major beneficiary of Naira – a picky deal.
It relies heavily on local crude oil to meet its refining needs, and this new development could trigger fuel prices.
Dangote refineries are not the only ones affected, such as Waltersmith Petroman and other private refineries at Bua refineries, which may also be at the receiving end of the new NNPC decision.
Economic analysts also speculated that the suspension could have a ripple effect on Nigeria’s economy.
They believe that Naira has faced a lot of pressure in the past, so removing this mechanism of saving dollars could enhance currency volatility.
