The Federal Government of Nigeria is set to deliver up to 400,000 barrels of crude oil daily to the Dangote refinery under its recently launched naira-for-crude agreement, according to a report by Bloomberg. This agreement is expected to see 24 million barrels of Nigerian crude oil delivered to the 650,000-barrel-a-day refinery between October and November 2024.
This substantial supply will increase Dangote refinery’s local feedstock reliance and is expected to impact both Nigeria’s oil export market and the Atlantic crude market. Ronan Hodgson, an analyst with FGE, has predicted a tightening of the West African crude market, which could see Nigerian exports fall below 1 million barrels per day due to the high domestic allocation for the refinery.
The Bloomberg report noted that this is a notable shift, with Dangote gradually ramping up its operations, having taken in an average of 255,000 barrels per day over the first half of 2024. The refinery, currently operating at 60-70% capacity, is projected to hit full processing rates in the coming months.
With this arrangement, Nigeria’s National Petroleum Company (NNPC) will be the exclusive distributor of gasoline produced by the refinery. If Dangote refinery continues to increase its output, Nigeria could reduce its reliance on costly imported oil products, realizing a long-standing goal of enhancing domestic refining capacity and reducing fuel import expenses.
This development is also expected to impact Dangote’s crude purchases from the U.S., which had earlier seen imports of West Texas Intermediate (WTI) Midland crude, some of which were re-sold before plans to buy more were scrapped.
Analysts expect that as the refinery’s capacity reaches full strength, West Africa’s demand for imported gasoline and diesel will significantly shrink, with major implications for the local and global energy market.
