The Nigerian National Petroleum Company Limited (NNPC Ltd.), Nigeria’s government owned oil corporation, has addressed recent media reports alleging the unilateral termination of its crude oil supply contract with the Dangote Refinery, Africa’s largest single train refinery. In a press release issued on March 10, 2025, NNPC Ltd. confirmed that the six-month Naira-denominated sales agreement, initiated in October 2024, remains active until the end of March 2025, with negotiations underway for a renewal.
In the agreement, NNPC is committed to supplying up to 300,000 barrels per day (bpd) to the Dangote Refinery, subject to availability, while the transactions are conducted in Naira, aligning with a 2023 federal directive mandating domestic crude sales in local currency to stabilize foreign exchange reserves.
NNPC said in its report that it has delivered 48 million barrels of crude oil to the Dangote Refinery, bringing total supplies since the refinery’s operational launch in mid-2023 to 84 million barrels, supplying the previous 38 million barrels of crude in US $, the globally acclaimed currency for crude oil transactions.
The NNPC-Dangote agreement is a cornerstone of Nigeria’s strategy to end costly fuel imports and retain value within its economy. Prior to 2023, Nigeria—Africa’s top oil producer—imported over 90% of its refined petroleum due to underperforming state-run refineries. The 650,000 bpd Dangote Refinery, alongside newer modular plants like Waltersmith’s 5,000 bpd facility, aims to reverse this trend. Latest figures suggests that Nigeria still imports a significant portion of petroleum needs.
The Petroleum Industry Act (PIA) 2021 prioritized domestic crude supply obligations, requiring producers to allocate portions of output to local refineries. In late 2023, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) mandated that all domestic sales be settled in Naira, easing dollar demands amid a currency crisis.
NNPC’s partnership with Dangote dates to 2021, when both parties signed an initial 20-year crude supply agreement ahead of the refinery’s commissioning. However, delays in construction and operational start-ups necessitated shorter-term contracts. In 2023, NNPC Ltd. secured a 15% equity stake in the Dangote Refinery for $2.76 billion, cementing its role as a strategic partner, which has now been cancelled. In 2024, a six-month Naira-denominated contract replaced prior dollar-based deals, reflecting Nigeria’s foreign exchange conservation efforts.
Other refineries, such as BUA Group’s 200,000 bpd facility (under construction), have similar agreements with NNPC Ltd., though Dangote remains the largest beneficiary. While the partnership has been largely collaborative, challenges persist. Nigeria’s crude output remains below its 1.78 million bpd OPEC quota, struggling at approximately 1.3 million bpd due to theft and underinvestment. Critics argue that Naira payments expose refiners to exchange rate volatility. However, NNPC insists this stabilizes the local economy.
Meanwhile, the Dangote Refinery’s full operational capacity has been delayed to late 2025, pending pipeline infrastructure completion. Dangote Industries’ Group Executive, Devakumar Edwin, confirmed in February 2025 that the refinery now meets 50% of Nigeria’s diesel and aviation fuel demand, with gasoline production expected by Q3 2025.
With the March 2025 contract expiry approaching, NNPC and Dangote are negotiating terms for a multi-year agreement. Key considerations will include volume guarantees, aligning supply commitments with Nigeria’s production recovery efforts, pricing mechanisms that account for global crude benchmarks like Brent, and infrastructure upgrades, implementing improvements to streamline deliveries.
The refinery’s success is pivotal to Nigeria’s economy; the World Bank estimates that eliminating fuel imports could save the country $26 billion annually. NNPC Ltd. reaffirmed its commitment to “supporting local refining capacity through equitable crude supply agreements,” signalling continued collaboration with Dangote and other domestic refiners. Market observers anticipate the new contract terms to be finalized ahead of the March 2025 expiry date.
