Dangote Refinery Shifts to Dollar-Denominated Pricing for Petroleum Products
Dangote Refinery has launched a new pricing model that sets the depot price for premium motor spirit (petrol) at $0.779 per liter, alongside updated benchmark prices for diesel and aviation fuel, following a transition to dollar-denominated trading.
End of Naira Payments for Refined Products
This move signifies a substantial change in the refinery’s commercial dealings and effectively ends naira payments for refined petroleum products as stipulated in the Federal Government’s Crude to Naira Agreement, which was implemented on October 1, 2024.
Significant Implications for Nigeria’s Oil Market
As the largest supplier of refined petroleum products in Nigeria, this operational pivot by Dangote Refinery could greatly influence pricing dynamics within the country’s deregulated downstream oil sector.
New Pricing Structure Comes into Effect
The revised pricing structure, effective from July 13, 2026, sets automotive diesel at $1.087 per liter, while coastal transport for petrol is priced at $1,044.62 per tonne. A recent notice distributed to oil marketers indicated that all previously issued naira-based invoices for both gantry and shoreside transactions are now invalid.
Transition to Dollar Pricing Explained
The notice, issued by the refinery’s Group Commercial Division, emphasized the shift to a modern pricing strategy. This approach is designed to align the pricing of petroleum products with the currency used for procuring a significant portion of crude oil feedstocks. Sources within the industry recognized the need for a unified pricing framework due to a growing disparity between the currency used to acquire crude oil and that used for selling refined products.
Impact of Currency Mismatch on Operations
An official at the refinery noted that while the majority of crude oil is sourced from the Nigerian National Oil Company under a dollar-denominated agreement, much of the refined output remains sold domestically in naira. This currency mismatch exposes the refinery to increased currency risks, particularly in light of fluctuations in international oil prices and exchange rate uncertainties.
Challenges Faced by Nigeria’s Downstream Oil Sector
The transition to dollar-based trading signals enduring currency pressures in Nigeria’s downstream oil market, despite ongoing efforts to enhance local refining capabilities and reduce reliance on imported fuels. Recent trends suggest that a portion of crude supplies is reverting to dollar-based trading, raising new concerns regarding the future of the government’s naira crude oil trade and its effects on domestic fuel prices.
The new dollar benchmark is anticipated to serve as a reference price for marketers sourcing products directly from refineries; however, the ultimate retail price at the pump will hinge on several factors, including the current Naira-to-Dollar exchange rate, logistical costs, transportation margins, regulatory fees, and operational expenses of marketers.
