Dangote Refinery switches petrol, diesel sales from naira to dollars — here are the implications for Nigerians

• Dangote Refinery has moved sales of petrol and diesel from naira-based transactions to dollar payments for some buyers. 

• Nigerians will still pay for fuel at filling stations in naira, not dollars. 

• The move is linked to the refinery’s foreign exchange exposure and dollar-related operational costs. 

• Marketers’ costs and exchange rate movements could influence future fuel prices. 

The Dangote Petroleum Refinery has moved the sale of some of its refined petroleum products, including Premium Motor Spirit (PMS), popularly called petrol, and Automotive Gas Oil (AGO), also known as diesel, from naira to US dollars, a development that could affect how fuel marketers and bulk buyers source products in Nigeria. 

The decision means companies buying products directly from the refinery may now need to make payments in dollars instead of naira. The move comes after the refinery halted naira-based petrol sales, following concerns around foreign exchange exposure and crude oil supply arrangements. 

However, the development does not mean Nigerians will start paying for petrol and diesel at filling stations in dollars. Retail consumers will still pay in naira when buying fuel, but the change could influence the cost structure for marketers who purchase products from the refinery and may affect pump prices depending on exchange rate movements and other market factors. 

The refinery’s decision is linked to the fact that a significant part of its operational costs, including crude oil purchases and other international expenses, are tied to the US dollar.

Industry reports said the earlier arrangement, where Dangote Refinery sold products locally in naira, was becoming difficult to sustain because of foreign exchange pressures and the refinery’s need to meet dollar-denominated obligations. 

The refinery had previously benefited from the Federal Government’s crude-for-naira arrangement, under which crude was supplied to the refinery and payments were made in naira. The arrangement was designed partly to reduce pressure on Nigeria’s foreign exchange market.

For ordinary Nigerians, the immediate implication is that fuel will not be bought with dollars at filling stations.

Instead, the impact may come indirectly through fuel marketers who buy products from Dangote Refinery. If marketers pay in dollars and the naira weakens against the dollar, the cost of importing or distributing fuel could rise, potentially putting pressure on petrol and diesel prices. 

The development has also renewed debate about whether having a major domestic refinery selling fuel in dollars could reduce or increase pressure on Nigerians already dealing with high living costs.

The Dangote Petroleum Refinery, located in Lekki, Lagos, is Africa’s largest refinery, with a capacity of 650,000 barrels per day. It was built to reduce Nigeria’s dependence on imported refined petroleum products and improve domestic fuel supply. 

Since beginning operations, the refinery has supplied refined products including petrol, diesel and aviation fuel to the Nigerian market while also exporting some products internationally. 

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The refinery has also launched initiatives aimed at improving fuel distribution in Nigeria, including direct supply of petrol and diesel using its logistics network. 

The impact of the dollar-based sales model will depend on several factors, including the naira-to-dollar exchange rate, crude supply arrangements, production costs and how marketers adjust their pricing.

While the policy does not mean Nigerians will pay for fuel directly in dollars, industry watchers expect it to influence the economics of fuel supply in the country.