Dangote Refinery Moves to Sell Petrol, Diesel in Dollars, Raising Price Hike Fears
By Aboki Forex —
Fresh concerns have emerged over a possible increase in petrol price and renewed pressure on the naira following reports that Dangote Petroleum Refinery may begin selling refined petroleum products in U.S. dollars.
The development comes amid renewed tensions in the Middle East, which have pushed global crude oil prices higher and raised fears of supply disruptions in the international energy market.
Shift to Dollar Transactions Sparks Naira Worries
According to a report by Daily Trust, the Dangote refinery is planning to sell Premium Motor Spirit (PMS) and diesel in dollars instead of naira. This move has triggered anxiety among industry stakeholders who fear it could lead to higher pump prices and add to the depreciation pressure on the local currency.
Nigeria's downstream sector has long relied on naira-denominated transactions for domestic fuel sales. A switch to dollar pricing would effectively link local fuel costs to foreign exchange rates, exposing consumers to volatility in the currency market.
The naira has already faced significant pressure in recent months, with the official and parallel market rates diverging sharply. Analysts warn that dollar-denominated fuel sales could increase demand for greenback, further weakening the naira.
Geopolitical Tensions Add to Supply Concerns
The report also noted that the decision comes at a time when geopolitical tensions in the Middle East are pushing crude oil prices higher. Global benchmark Brent crude has climbed in recent weeks, raising the cost of feedstock for refineries worldwide.
Higher crude prices typically translate into higher refined product costs. If Dangote Refinery sells in dollars, the impact on Nigerian consumers could be immediate and severe, as marketers would pass on the exchange rate risk to end users.
The Dangote refinery, which is located in the Lekki Free Zone in Lagos, is expected to be Africa's largest oil refinery when fully operational. It has a capacity of 650,000 barrels per day and is designed to meet all of Nigeria's fuel demand with surplus for export.
What This Means for Consumers and the Naira
For Nigerian motorists and businesses, the shift to dollar pricing could mean higher costs at the pump and for diesel-powered operations. Manufacturers, transporters, and farmers who rely on diesel for machinery and logistics would face increased operating expenses, potentially feeding into broader inflation.
The development also puts additional pressure on the Central Bank of Nigeria (CBN) to manage foreign exchange reserves and ensure adequate dollar supply for fuel imports and now local refining purchases. If demand for dollars rises due to naira-based fuel sales, the CBN may face tougher choices on exchange rate policy.
Stakeholders are watching closely for official confirmation from Dangote Group or the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on the new pricing model. For now, the prospect of dollar-denominated fuel sales has heightened uncertainty in a market already grappling with high inflation and currency instability.