NNPC’s Suspension of Crude Supply to Dangote Refinery Hits OPEC Output, Sparks Fuel Price Hike Concerns

The Nigerian National Petroleum Company Limited’s (NNPC) decision to suspend crude oil supply to the Dangote refinery and other domestic refineries has had a ripple effect on global oil markets, contributing to a decline in OPEC’s oil output in March. According to a Reuters survey, OPEC’s production fell by 110,000 barrels per day (bpd), with Nigeria accounting for a 50,000 bpd drop due to reduced deliveries to the Dangote refinery.

The suspension stems from disputes over payment terms between (NNPC) and Dangote, following the apparent termination of the naira-for-crude deal introduced in October 2024. Under the agreement, NNPC supplied crude to the refinery in exchange for refined products sold in naira. However, disagreements over pricing benchmarks and the withdrawal of credit facilities have stalled negotiations, leaving seven allocated cargoes—amounting to 245,000 bpd—undelivered.

The fallout has exacerbated fuel price hikes in Nigeria, as the Dangote refinery suspended its naira-based product sales amid uncertainty over renewing the deal. Industry sources say the refinery now requires letters of credit before receiving crude cargoes, further complicating operations.

Nigeria’s oil sector faces additional challenges, including pipeline sabotage in Rivers State and dwindling demand for Nigerian crude due to cheaper alternatives like US WTI and Caspian CPC Blend. Market participants report that up to 15 April-loading Nigerian cargoes remain unsold, signaling weak international interest.

Meanwhile, experts warn that declining crude prices—Brent at 63.23perbarrelandWTIat59.82—will strain Nigeria’s 2025 budget, which is benchmarked at 75perbarrel.WithAfricaimporting453 billion plan to boost intra-African refining capacity may offer some relief.

As NNPC grapples with operational and financial hurdles, the suspension of crude supply underscores the urgent need for sustainable solutions to stabilize Nigeria’s oil and gas sector and meet domestic energy demands.