KEY POINTS
- Nigeria’s NNPC expanded supply to the Dangote Refinery, now shipping 300,000 bpd under a two-year deal.
- The strategy aims to reduce dollar demand and stabilize pump prices, with 60% of crude supplied in naira.
- The shift comes as global oil prices weaken, with Bonny Light near $69 and Citi warning of a slide to $60.
Nigeria is leaning more heavily on its massive Dangote Refinery to buffer the economy from sliding oil prices and mounting supply in global markets, extending crude supply commitments even as its flagship export blends lose value.
The Nigerian National Petroleum Company (NNPC) said it has expanded a two-year supply agreement with the $20 billion Lagos plant, raising deliveries to about 300,000 barrels per day in September and October.
Since late last year, the state oil firm has provided more than 82 million barrels to the privately owned facility, with 60% of those shipments settled in naira — a move designed to reduce pressure on foreign reserves and stabilize domestic fuel prices.
Officials expect the refinery, which has been operating since January 2024, to eliminate imports of crude feedstock before the end of the year as it ramps toward its 650,000 bpd nameplate capacity. Abuja says the pilot arrangement could later be extended to smaller refiners to encourage more localized processing and cut dollar demand.
Refinery Strategy Gains Importance Amid Global Supply Glut
The domestic push comes as Nigeria’s export earnings face headwinds. Bonny Light crude slid to around $69 a barrel this week, mirroring losses across the market after OPEC+ pledged to add 137,000 barrels per day of output in November and northern Iraq restarted exports through Turkey.
Traders say the combination of resurgent Iraqi flows, record Russian shipments, and OPEC+’s measured supply increases risks tipping the market into surplus. Analysts at Citigroup have warned prices could slump to $60 before year-end, further straining producers like Nigeria that rely on crude sales for the bulk of government revenue.
By channeling a larger share of its production to domestic refining, Nigeria hopes to reduce its exposure to volatile export earnings, while strengthening its currency and creating a buffer against external price shocks
