The Organisation of the Petroleum Exporting Countries (OPEC) experienced a decline in its oil output in March, primarily driven by Nigeria's decision to curtail crude oil supplies to domestic refineries, most notably the newly commissioned Dangote Refinery. A recent Reuters survey highlighted this disruption, revealing a collective drop in production from Nigeria, Iran, and Venezuela.
The survey indicated that Nigeria's crude oil supply fell by 50,000 barrels per day (bpd) in March. This decrease was attributed to the suspension of deliveries to the Dangote Refinery, a move that overshadowed an increase in Nigeria's crude oil exports. Despite this internal supply adjustment, Reuters noted that Nigeria's overall crude oil production remained slightly above its allocated OPEC quota.
Overall, OPEC's total crude oil production in March averaged 26.63 million bpd, marking a 110,000 bpd decrease from February's figure. Alongside Nigeria, both Iran and Venezuela also saw their output decline by 50,000 bpd each, with their reductions reportedly linked to renewed efforts by the United States to restrict their oil flows.
Further investigation revealed that the Nigerian National Petroleum Company Limited (NNPC) had delayed the delivery of seven crude oil cargoes, initially earmarked for the Dangote Refinery in the preceding month. A report by S&P Global attributed this delay to an unresolved disagreement between the NNPC and Dangote Refinery regarding payment terms.
These seven cargoes were projected to supply approximately 245,000 bpd to the refinery in April, translating to a substantial 7.2 million barrels over a 30-day period. The S&P Global report explicitly stated, "According to trade sources and Nigerian port authorities, NNPC has allocated seven crude oil cargoes to deliver around 245,000 barrels per day to the Dangote site in April but is yet to agree on payment terms."
Sources indicate that the NNPC and the Dangote Group have been embroiled in disputes concerning payment modalities following the apparent termination of a previously established naira-for-crude oil exchange agreement. This naira-based transaction framework, initiated in October 2024, was intended to help stabilize and potentially reduce domestic fuel prices in Nigeria.
However, beyond the cessation of this specific deal, it has been reported that credit facilities previously extended to the Dangote Refinery have also been withdrawn. Consequently, the refinery is now reportedly required to provide letters of credit before any future crude oil deliveries are made. When approached for comment, an NNPC official declined, citing that such commercial transactions are not publicly disclosed.
Data from S&P Global suggests that while the naira-for-crude deal was in effect, the NNPC delivered approximately 280,000 bpd of crude oil to the Dangote Refinery in naira by March 10th. This figure fell short of the initially agreed volume of 385,000 bpd under the six-month arrangement, which concluded on the day this report was filed. The non-renewal of this deal has sparked concerns about potential increases in domestic fuel prices, particularly following the Dangote Refinery's announcement of a suspension of naira-based fuel sales.
Adding to the NNPC's challenges, the company is reportedly grappling with foreign exchange shortages, existing debt concerns, and emerging issues related to instability and pipeline sabotage in Rivers State, further clouding Nigeria's oil production outlook. In contrast to the Nigerian government's optimistic stance, a Dangote executive expressed skepticism regarding the likelihood of a renewed naira-for-crude oil agreement, stating, "We are not even sure whether it will be renewed."
The executive also argued that the previous obligation for Dangote to sell its refined products in naira under the now-terminated deal had become a significant operational burden, exposing the refinery to financial risks associated with fluctuating exchange rates when contract prices were benchmarked in dollars but converted to naira at the point of sale.
Meanwhile, reports indicate that Nigerian crude oil grades faced weak demand in the April trade cycle due to the ample availability of cheaper alternatives from regions like the US, Caspian, and the Mediterranean. As the trade cycle transitions to May, a significant number of unsold April-loading Nigerian cargoes are reportedly still seeking buyers.
In other developments within the African energy sector, the African Export–Import Bank (Afreximbank), a key investor in oil and gas projects, has allocated $3 billion to finance the purchase of refined petroleum products within Africa. This initiative is part of a broader strategy to enhance refining capacity across the continent, which currently exports a significant portion of its crude oil and natural gas while remaining heavily reliant on imported refined products due to a lack of adequate storage infrastructure and older refineries with limited output.
Globally, crude oil prices continued their downward trend on Tuesday, with Brent crude falling to $63.23 per barrel and West Texas Intermediate (WTI) crude dropping to $59.82 per barrel. Experts have cautioned that this sustained decline in crude oil prices could negatively impact Nigeria's 2025 budget, which has benchmarked crude oil at a price of $75 per barrel.