Nigeria?s oil sector is facing headwinds as 12 March-loading crude cargoes remain unsold, highlighting weak demand for the country?s exports.

Traders reported that as of 10 March, buyers for these cargoes were still being sought, with much of the April export schedule also available, according to data from Argus.

The sluggish sales come as Nigerian crude faces stiff competition from cheaper alternatives such as Kazakh-origin light sour CPC Blend, US WTI, and Mediterranean sweet crudes in Europe, where refinery maintenance season is set to begin.

The oversupply of competitively priced alternatives has pushed down the value of April-loading Nigerian cargoes, exacerbating the challenges for Africa?s largest oil producer.

This comes at a time when Nigeria?s state-owned Nigerian National Petroleum Company (NNPC) is negotiating an extension of its six-month crude supply agreement with the 650,000 bpd Dangote refinery, which ends this month.

Under the current arrangement, NNPC has been supplying Dangote with nearly 300,000 bpd of crude in naira since October 2024, as part of a programme aimed at stabilising the local currency and reducing inflation.

The refinery, which began operations in late 2023, has relied heavily on NNPC for its crude needs, with over 84 million barrels supplied to date. Vortexa data showed that domestically sourced oil accounted for more than 80% of Dangote?s crude deliveries between January 2024 and February 2025.

The programme has been credited with helping to reduce gasoline prices, curb inflation, and stabilise the naira. However, its future remains uncertain. Crude prices under the agreement are set in dollars, with Dangote paying the naira equivalent at a discounted exchange rate.

A crude trader told Argus that NNPC?s ability to sustain discounted sales is constrained by its obligations to finance deals tied to crude sales.

Additionally, NNPC may have limited volumes available for domestic refiners, as some sources suggest the company has secured term supply deals extending up to 2030.

The terms of the NNPC-Dangote arrangement have already evolved since its inception.

Initially, Dangote was entitled to pay in naira for the first 10 cargoes loaded each month, with additional cargoes priced in dollars. However, NNPC now offers some cargoes strictly for payment in dollars, while others allow naira payments. Any further changes to the terms of an extended programme could pressure Dangote to increase its reliance on foreign crude imports.

Refinery sources indicated in January that Dangote plans to source at least half of its crude requirements from the import market and is constructing eight storage tanks to facilitate this shift.

Despite the challenges, NNPC may have little choice but to continue supplying domestic refiners like Dangote under the right of first refusal outlined in Nigeria?s Petroleum Industry Act. The Domestic Crude Supply Obligation (DCSO) system, enforced by upstream regulator NUPRC since May 2023, mandates monthly meetings between domestic refiners and upstream operators to review production and loading programmes. Commercial negotiations must be completed or complaints lodged within 48 hours of these meetings.

As Nigeria grapples with weak export demand and evolving domestic supply dynamics, the outcome of NNPC?s negotiations with Dangote and the broader implementation of the DCSO system will be critical in shaping the country?s oil sector in the coming months. For now, the unsold March cargoes and ample April availability underscore the challenges facing Nigerian crude in a competitive global market. (BusinessDay)

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