Dangote Petroleum Refinery has switched payment for the sale of Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), and Aviation Turbine Kerosene (ATK) to U.S. dollar.
The new policy, which took effect immediately, applies to both gantry and coastal product sales.
Industry sources familiar with the refinery’s operations said the decision was driven by increasing foreign exchange exposure arising from the refinery’s crude procurement structure and persistent volatility in the foreign exchange market.
According to a senior industry source, the refinery is now receiving a larger proportion of its crude oil supplies from the Nigerian National Petroleum Company Limited (NNPCL) under dollar-denominated arrangements, while a substantial volume of its refined products has continued to be sold in naira.
The source explained that the growing mismatch between dollar-based crude purchases and naira-denominated product sales had exposed the refinery to significant exchange rate risks, making the transition to dollar-based product sales necessary.
“The decision takes effect immediately. All PMS, AGO and ATK sales, both gantry and coastal, are now dollar-based,” the source said.
It was further gathered that a memo to this effect has been sent to marketers lifting fuel from the refinery.
An official further noted that continued fluctuations in international crude oil prices and uncertainty in Nigeria’s foreign exchange market also influenced the refinery’s decision.
According to the source, the refinery now receives fewer crude cargoes priced in naira compared with those priced in dollars, while a larger share of its petroleum products has been sold locally in naira.
“While we require more than 15 cargoes of crude monthly for our operations, the NNPCL is struggling to supply three cargos in Naira under the naira-for-crude arrangement,” an official said.
Market analysts believe the policy could have significant implications for fuel pricing, distribution costs and foreign exchange demand, especially as Dangote Refinery remains one of the country’s largest suppliers of refined petroleum products.
Speaking on the development, an oil and gas industry analyst, Otunba Tunji Oyebanji, said, “This means he’s not getting the crude or the arrangement is not working as expected. We’ve said it from the beginning that this is a tall order. Nigeria was not producing enough crude to start with. Then they have already pledged some of that crude to third parties. They took some advanced money from some of the buyers and then they are paying them back with crude oil. That limits the amount of crude available to sell either to Dangote or the international market.
“Don’t forget crude oil is also our number one export earner. I’m not standing in for NNPC. I’m just saying this might be the challenge that has made it not to work.
“The implication is that more Dangote crude has to be bought from other sources outside Nigeria and of course he has to pay dollars. So I think that’s why he said he is going to start selling in dollars. The implication of this of course is that it is going to increase demand for dollars and that means the naira may weaken.” – Daily Trust.
