Nigeria’s downstream petroleum sector is facing fresh uncertainty following Dangote Petroleum Refinery’s decision to price refined petroleum products in U.S. dollars, a move that has already triggered a sharp increase in fuel prices across several depots. Industry experts warn that the policy could significantly increase demand for foreign exchange, place additional pressure on the naira, and expose consumers to more frequent fuel price adjustments. With petrol prices rising by more than N100 per litre in some locations, motorists and businesses are bracing for higher transportation and operating costs.
Under the new arrangement, marketers are expected to source dollars before purchasing petrol, diesel, and aviation fuel from the refinery. Analysts estimate that operators may require as much as $1.84 billion monthly to meet current demand levels. Petrol alone is projected to account for more than $1 billion of that figure, highlighting the scale of foreign exchange needed to sustain supply. While the funds will remain within the local economy through payments to the refinery, experts say the shift will still test Nigeria’s FX liquidity and create new challenges for marketers.
The policy marks a major departure from the naira-based sales framework introduced under the Federal Government’s naira-for-crude initiative, which was designed to reduce pressure on the foreign exchange market and strengthen domestic refining. Industry sources believe the latest development may be linked to growing difficulties in securing sufficient local crude supplies, forcing the refinery to rely more heavily on imported crude purchased in dollars. As a result, the refinery has transferred a significant portion of the foreign exchange risk to marketers and, ultimately, consumers.
Economic and energy experts say the consequences could extend beyond the fuel market. According to analysts, a rise in foreign exchange demand may weaken the naira and contribute to broader inflationary pressures across the economy. They note that fuel prices will now be influenced more directly by international crude oil prices, exchange-rate fluctuations, and logistics costs. Some marketers may also be forced to seek additional financing facilities and trade instruments, increasing transaction costs and operational complexity.
Despite concerns, supporters of the move argue that it reflects the realities of a deregulated petroleum market where crude oil is traded globally in dollars. However, marketers and industry stakeholders have called for greater transparency regarding the implementation of the naira-for-crude programme and the basis for the refinery’s pricing decisions. As debate continues, many believe the development raises important questions about the future of fuel pricing, the stability of Nigeria’s foreign exchange market, and the country’s efforts to strengthen local value addition and energy security.
source: The guardian
