… as FG considers new forward sale agreement until 2034
Oredola Adeola
The likelihood of the continuation of the Naira-for-Crude arrangement between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery, along with other local refiners, after March 31, 2025, appears slim due to multiple factors, including extensive crude-backed loan commitments.
Industry sources told Advisors Reports that sustaining the deal could be challenging, despite the significant foreign exchange earnings recorded in Phase 1 of the agreement.
They noted that if the same crude were sold on the international market, it would be priced in U.S. dollars—a key factor that could hinder the continuation of the policy.
Findings by Advisors Reports indicate that the situation is further complicated by ongoing discussions within the federal government regarding a new forward sale agreement, expected to extend until 2034.
This proposed deal is driven by Nigeria’s urgent need to settle the Central Bank of Nigeria’s (CBN) outstanding $3.2 billion obligations, including $1.2 billion in Eurobond yields due in 2025.
The Naira-for-Crude deal, introduced as a pilot scheme on October 1, 2024, was initially set to run for six months until March 2025.
The agreement aimed at supporting domestic refining, reducing dependence on imports, and stabilizing the petroleum market has suffered a setback.
This follows a statement from Dangote confirming that it has temporarily halted the sale of petroleum products in naira, as negotiations with NNPCL over the naira-for-crude arrangement appear to have collapsed.
However, the Technical Sub-Committee on the Naira-for-Crude Policy, which recently met to review Phase 1, has maintained that the agreement remains in place, affirming a commitment to stabilize supply and maximize domestic refining capacity.
This position was reaffirmed following high-level discussions involving Finance Minister Wale Edun, Federal Inland Revenue Service (FIRS) Executive Chairman Dr. Zacch Adedeji, Aliko Dangote, and Sayyu Dantata, Chairman of MRS.
To mitigate the impact of a potential suspension, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has been mandated by the Committee to explore alternative crude supply options.
However, industry experts argue that the policy may not be beneficial to Nigeria’s economy in the long run, as the country is in dire need of foreign exchange.
They highlight NNPCL’s crude-backed loan commitments, which require the company to allocate significant crude volumes to foreign creditors.
Recall that since 2019, NNPCL has engaged in multiple crude-backed loan commitments estimated at approximately $22.465 billion to settle loans.
These deals include, $750 million vendor financing program and a $1.5 billion agreement, which expired in May 2023 and November 2024, respectively.
$3.3 billion emergency crude repayment loan, secured in August 2023 and underwritten by Afreximbank through Project Gazelle Funding Ltd (PGFL), an SPV incorporated in the Bahamas, with upfront financing from Afreximbank, Oando Plc, and Sahara Energy.
$1 billion crude-backed loan, which played a critical role in supporting Dangote Refinery during liquidity constraints.
Project Leopard ($2 billion) and Project Gazelle II ($7.5 billion), scheduled for full repayment in January 2029 and April 2034, respectively.
$3 billion NLNG Train 7 financing deal, set to mature in May 2029.
Project Eagle ($1 billion), maturing in June 2025, and Project Brogue ($300 million), due in January 2027.
Project Bison ($1.04 billion), set to expire in December 2026, and Project Yield ($1 billion), maturing in June 2029. and the offtake financing ($75 million), expected to mature in October 2029.
These extensive commitments have therefore raised concerns about potential disruptions in fuel supply and price volatility in Nigeria’s petroleum market.
In response to these challenges, the Technical Sub-Committee on the Naira-for-Crude Policy has tasked NUPRC with ensuring crude supply to local refiners who have repeatedly expressed frustration over receiving less than their entitled allocations.
Recall that under the Petroleum Industry Act (PIA), NUPRC is empowered to ensure adequate crude supply through a “willing buyer, willing seller” model.
NUPRC Chief Executive, Engr. Gbenga Komolafe recently disclosed that interventions, including kinetic and non-kinetic measures, have significantly reduced oil theft to 5,000 barrels per day (BOPD), contributing to an increase in production to 1.7 million BOPD.
Despite this progress, the commission has remained focused on its commitment to achieving over 2 million BOPD through its Project 1 million barrels initiative, launched in October 2024, aimed at meeting domestic crude supply requirements and bolstering national revenue.
As discussions for a new forward sale agreement progress, stakeholders in the oil and gas sector are closely monitoring the committee, which was expected to meet on Monday, for a resolution to kick-start Phase 2.
Advisors Reports gathered that the Committee faces the task of addressing financial and policy challenges to ensure the sustainability of Nigeria’s domestic refining capacity and foreign exchange stability.
