Dangote Petroleum Refinery has switched payment for the sale of Premium Motor Spirit (PMS), Automotive Gas Oil (AGO) and Aviation Turbine Kerosene (ATK) from naira to U.S. dollars.

The new policy, which took immediate effect, applies to both gantry and coastal product sales.

Industry sources said the decision was driven by the refinery’s increasing foreign exchange exposure, following changes in its crude procurement structure and persistent volatility in the foreign exchange market.

According to a senior industry source, the refinery now receives a larger proportion of its crude oil supplies from the Nigerian National Petroleum Company Limited (NNPCL) under dollar-denominated arrangements, while a significant volume of its refined products has continued to be sold in naira.

The source explained that the mismatch between dollar-based crude purchases and naira-denominated product sales had exposed the refinery to substantial exchange rate risks, making the transition to dollar-based product sales necessary.

“The decision takes effect immediately. All PMS, AGO and ATK sales, both gantry and coastal, are now dollar-based,” the source said.

It was further gathered that marketers lifting petroleum products from the refinery have been notified of the new payment arrangement.

Another official said continued fluctuations in global crude oil prices and uncertainty in Nigeria’s foreign exchange market also influenced the decision.

According to the source, the refinery now receives fewer crude cargoes priced in naira than those priced in dollars, despite selling a larger share of its refined products in the domestic market in naira.

“While we require more than 15 cargoes of crude monthly for our operations, the NNPCL is struggling to supply three cargoes in naira under the naira-for-crude arrangement,” the official said.

Market analysts say the policy could have significant implications for fuel pricing, distribution costs and foreign exchange demand, given Dangote Refinery’s position as one of Nigeria’s largest suppliers of refined petroleum products.

Commenting on the development, oil and gas industry analyst Otunba Tunji Oyebanji said the decision suggests the existing crude supply arrangement may not be functioning as expected.

“This means he’s not getting the crude or the arrangement is not working as expected. We’ve said it from the beginning that this is a tall order. Nigeria was not producing enough crude to start with. Then they have already pledged some of that crude to third parties. They took some advance money from some of the buyers and are paying them back with crude oil. That limits the amount of crude available to sell either to Dangote or the international market.

“Don’t forget crude oil is also our number one export earner. I’m not standing in for NNPC. I’m just saying this might be the challenge that has made it not work.

“The implication is that more crude has to be bought from sources outside Nigeria, and of course payment has to be made in dollars. That is why the refinery has decided to start selling in dollars. The implication is that it will increase demand for dollars, which could put further pressure on the naira,” Oyebanji said.