Dangote’s dollar pricing reflects Nigeria’s crude supply challenge

AFRICA’S largest refinery has begun pricing its refined petroleum products in U.S. dollars after failing to secure enough Nigerian crude oil to sustain its operations, according to Oilprice.com.

Dangote Petroleum Refinery, with a processing capacity of 700,000 barrels of crude per day, announced that domestic prices for petrol, diesel and aviation fuel will now be benchmarked in dollars. The company said the decision follows persistent difficulties in obtaining sufficient crude through the Nigerian government’s naira-for-crude arrangement. Under the new pricing, petrol is set at $0.779 per litre, diesel at $1.087 per litre and jet fuel at $0.942 per litre.

“Following our email on the 9th of July, 2026, regarding the transition from Naira to United States Dollars, please note that all issued Naira Coastal and Gantry PFIs/Deal Recaps are now invalid, and no payments should be made against them,” Dangote said on Monday.

According to the refinery, it requires between 13 cargoes and 15 cargoes of crude every month to operate efficiently. While the Nigerian National Petroleum Company (NNPC) Limited increased deliveries to 7 cargoes in May from about 5 previously, the remaining supply has had to be sourced from the international market, where purchases are denominated in dollars.

The naira-for-crude initiative, introduced in 2024, was designed to allow local refiners purchase Nigerian crude in naira, easing demand for foreign exchange (FX) and reducing exposure to exchange rate volatility. However, Dangote’s decision to shift its pricing benchmark suggests the arrangement has not supplied enough crude to meet the refinery’s requirements.

The development underscores a broader contradiction in Nigeria’s oil sector. Despite exporting well above 1 million barrels of crude oil daily, the country’s flagship refinery is still compelled to source part of its feedstock from the international market.

Since ramping up production, the Dangote refinery has significantly reduced Nigeria’s reliance on imported petrol, transforming the domestic fuel market after decades of dependence on foreign supplies. Yet securing adequate crude oil has emerged as a fresh challenge.

Although fuel marketers will continue making payments in naira, the amounts will be calculated using the prevailing exchange rate because prices are now pegged to the dollar. As a result, fluctuations in the naira’s value will have a more immediate impact on wholesale fuel prices.

For months, the refinery absorbed the cost difference created by purchasing crude in dollars while selling refined products in naira. The latest pricing adjustment signals that it is no longer willing to bear that burden.

Nigeria has addressed one long-standing challenge by establishing a refinery capable of meeting a substantial share of domestic fuel demand. Ensuring that the facility receives enough locally produced crude, however, has become an equally significant hurdle.

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Dangote refrinery explained in March that crude supplied by NNPC was not discounted, as the cargoes were priced at prevailing international market rates with an added premium.

According to the company, the limited supply meant it must source additional crude from both domestic and foreign traders, requiring the refinery to obtain FX at open market rates to complete the transactions.

NNPC is unable to supply sufficient crude to the Dangote refinery owing to existing contractual commitments, crude-backed loan repayments, and lower-than-expected oil production. The resulting shortfall has undermined the government’s naira-for-crude initiative, forcing the refinery to source more feedstock in dollars and increasing pressure on domestic fuel pricing, analysts say.