The federal government’s naira-for-crude policy appears to be facing a major setback following Dangote Petroleum Refinery’s decision to begin selling petroleum products in US dollars, a move that could have far-reaching implications for fuel prices, inflation, transport costs and the value of the naira. Rather than being viewed as a routine commercial decision, the refinery’s move is widely seen as a sign of the government’s inability to sustain the much-publicised naira-for-crude initiative. It also highlights the continued vulnerability of Nigeria’s domestic fuel market to fluctuations in the foreign exchange market, despite the country’s growing refining capacity. Effective July 13, 2026, Dangote Refinery fixed the ex-depot price of Premium Motor Spirit (PMS) at $0.779 per litre, diesel at $1.087 per litre, and aviation fuel at $0.942 per litre. The company also cancelled all previously issued invoices denominated in naira. The decision followed the refinery’s increasing reliance on crude oil purchased in dollars after supplies under the federal government’s naira-for-crude arrangement reportedly became insufficient. Dangote Refinery, a $20 billion investment and the world’s largest single-train refinery, has a refining capacity of 650,000 barrels per day, enough to meet Nigeria’s domestic fuel demand while exporting surplus refined products across Africa. However, industry reports indicate that the refinery received only seven domestic crude cargoes in May, far below its monthly requirement of between 13 and 15 cargoes. The shortfall forced the company to import a significant portion of its crude feedstock in dollars, exposing it to exchange-rate risks. At the current official exchange rate of about N1,380 to one US dollar, the refinery’s new PMS price translates to approximately N1,075 per litre before transportation costs, depot margins, regulatory charges and marketers’ profits are added. Although the immediate impact on pump prices may appear limited, analysts say the bigger concern is that petrol prices are now directly linked to movements in the foreign exchange market. For instance, if the exchange rate weakens to N1,500/$, the base cost of petrol would rise to about N1,169 per litre before additional charges. At N1,600/$, the cost would increase further to roughly N1,246 per litre. This means Nigerians could face higher fuel prices even if global crude oil prices and refining costs remain unchanged, simply because of a weaker naira. Ironically, this is the exact scenario the naira-for-crude initiative was designed to prevent. Introduced in 2024, the policy aimed to supply domestic refiners with crude oil in naira in order to reduce demand for foreign exchange, strengthen local refining, conserve foreign reserves and stabilise domestic fuel prices. Industry observers now argue that inconsistent implementation has significantly weakened those objectives. Professor Emeritus of Petroleum Economics, Wumi Iledare, said Dangote Refinery had simply announced the price at which it was willing to sell its products in a deregulated market. According to him, aligning revenues with the same currency used to purchase crude oil is a commercially sound response to foreign exchange exposure rather than an attempt to fix prices. While acknowledging the economic logic behind the decision, Iledare noted that Nigeria’s downstream petroleum market is still far from fully competitive. With state-owned refineries yet to operate at optimal capacity and imported fuel remaining expensive, Dangote Refinery has emerged as the country’s dominant supplier. As a result, a pricing decision by a single refinery can quickly have nationwide economic consequences. Industry stakeholders have also expressed concern over the development. The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) warned that conducting fuel transactions in dollars could encourage the gradual dollarisation of the Nigerian economy. Similarly, the Independent Petroleum Marketers Association of Nigeria (IPMAN) cautioned that marketers would now have to compete for scarce foreign exchange, increasing pressure on the naira and exposing fuel prices to greater volatility. Reports also indicate that some depot operators have already increased loading prices by as much as N113 per litre in anticipation of higher replacement costs. The implications could extend beyond the petroleum sector. According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation stood at 15.93 per cent in May 2026, while food inflation was 16.96 per cent. Fuel remains one of the country’s biggest inflation drivers because road transport accounts for the movement of most goods and passengers across the country. In addition, thousands of manufacturers, hospitals, schools and small businesses continue to rely on petrol and diesel-powered generators due to unreliable electricity supply. Consequently, any sustained increase in fuel prices is expected to push up transportation costs, food prices, production expenses and the overall cost of living. The latest development has also exposed what many analysts describe as a contradiction in the government’s energy reform agenda. The federal government promoted the naira-for-crude policy as a key strategy for reducing pressure on foreign exchange, strengthening energy security and stabilising domestic fuel prices. However, it failed to ensure the consistent supply of crude oil to local refiners in naira, a condition widely regarded as essential to the policy’s success. Once refiners were forced to source more crude in dollars, Dangote Refinery’s decision to switch to dollar-denominated sales became a commercial necessity rather than a voluntary choice. Ultimately, the refinery has acted in line with standard business practice by matching its revenue with the currency in which most of its costs are incurred. Analysts argue that the larger issue lies not with the refinery’s decision but with the policy inconsistencies that made it unavoidable. Unless the federal government urgently restores a transparent and reliable framework for supplying crude oil to domestic refiners in naira, experts warn that local refining alone may not guarantee lower fuel prices. Instead, the cost of petrol at filling stations could increasingly depend less on refining activities in Lekki and more on fluctuations in the value of the naira against the US dollar.
