The Dollarisation of Petrol

Nigeria's landmark Dangote Refinery has abandoned naira-denominated sales of petroleum products, a move that represents a significant policy setback for the nation's downstream oil sector. The refinery has switched to dollar pricing for its fuels, effectively ending the era of naira-priced petrol and signaling a vote of no confidence in the federal government's 'naira-for-crude' initiative.

Effective July 13, 2026, the refinery set its ex-depot prices in dollars: $0.779 per liter for Premium Motor Spirit (PMS), $1.087 for diesel, and $0.942 for aviation fuel. This decision came after the refinery's increasing reliance on crude oil purchased in dollars, as supplies under the government's naira-for-crude arrangement proved inadequate. The refinery reportedly received only seven domestic crude cargoes in May, far below its monthly requirement of 13-15 cargoes.

The shift to dollar pricing directly ties domestic fuel costs to the fluctuating fortunes of the naira. At the current official exchange rate of approximately N1,380 per US dollar, the new dollar price translates to roughly N1,075 per liter before additional costs. Analysts warn that any further depreciation of the naira could lead to higher pump prices, even without changes in global crude oil prices or refining costs.

The 'naira-for-crude' policy, introduced in 2024, aimed to supply local refiners with crude in naira to reduce dollar demand, strengthen local refining, and stabilize fuel prices. However, inconsistent implementation has undermined its objectives. The Dangote Refinery's decision underscores a painful reality: despite Nigeria's refining capacity, domestic fuel prices remain vulnerable to foreign exchange market volatility.