PENGASSAN: NNPC Faces Crude Supply Challenges to Dangote Refinery Due to Buhari’s Loan Collateral Deal

The Nigerian National Petroleum Company is struggling to provide crude to Dangote Refinery after ex-President Buhari used oil reserves as collateral for foreign loans

The NNPC crude supply challenges are currently impacting the Dangote Refinery, a key oil processing plant in Nigeria. According to Festus Osifo, the President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), the Nigerian National Petroleum Company (NNPC) is struggling to meet its crude supply obligations due to commitments made by the previous government.

In an interview monitored on Channels TV, Osifo disclosed that ex-President Muhammadu Buhari’s administration had used significant crude oil reserves as collateral for loans taken from foreign entities, which has now resulted in NNPC crude supply challenges. This loan arrangement has left the NNPC with insufficient crude to supply to the Dangote Refinery, a major player in Nigeria’s oil industry.

PENGASSAN revealed that although the Dangote Refinery had planned for crude supply agreements, the situation became complicated when the NNPC found itself constrained by the Buhari-era loan arrangements. The association highlighted that NNPC crude supply challenges stem from the use of oil assets to back foreign loans, which has caused a ripple effect in the country’s energy sector.

Additionally, Osifo pointed out that there is a pricing disparity between the NNPC and independent oil marketers. This disparity has further complicated the supply of refined products, with NNPC crude supply challenges impacting the cost at which fuel is sold. While the NNPC may procure fuel at higher prices, it often sells to marketers at a loss to stabilize domestic prices, resulting in pricing imbalances.

The Dangote Refinery, designed to reduce Nigeria’s dependency on imported refined petroleum products, has been forced to navigate the NNPC crude supply challenges since its launch. Discussions on crude procurement should have started earlier, according to Osifo, but the complexities of Nigeria’s oil industry, including demands for premiums by international oil companies (IOCs), have delayed progress.

With NNPC crude supply challenges persisting, independent marketers prefer purchasing from the NNPC due to more favorable pricing, although major marketers may still source directly from Dangote Refinery. The overall impact has been significant, as Nigeria continues to grapple with finding a balance between oil supply commitments and domestic fuel needs.