Nigeria's oil workers' union has ordered members to cut off crude supply to the Dangote Petroleum Refinery, escalating a labour dispute after hundreds of workers were dismissed and threatening to disrupt fuel supply in Africa's most populous nation.

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) directed branches at major oil firms to enforce an immediate halt to crude and gas deliveries to the refinery.

The union accused Dangote management of "misinformation" instead of addressing the alleged wrongful disengagement of unionised employees, according to a letter dated September 26 seen by Reuters.

The Dangote Refinery said on Friday it had laid off a small number of workers, citing sabotage in various units. That sparked criticism from an oil workers' union which said over 800 Nigerian workers were fired and allegedly replaced with foreign nationals mostly from India.

Dangote Refinery says sackings aimed at improving efficiency

"Crude oil supply valves to the refinery should be shut" and loading of vessels headed there halted immediately, PENGASSAN General Secretary Lumumba Okugbawa wrote.

Dangote Refinery said the dismissals were part of a reorganisation to improve safety and efficiency.

It said late on Saturday that "absolutely no law gives PENGASSAN the right to direct its branches to 'cut off' gas and crude oil supplies to Dangote Refinery or at all," or to interfere or disrupt its contracts with vendors and suppliers.

The dispute mounts pressure on the $20 billion refinery, which said it would suspend petrol sales in naira from September 28 due to crude supply shortfalls and foreign exchange mismatches. The move has raised concerns about rising fuel prices and further strain on Nigeria's currency.

PENGASSAN said chairs of union chapters at oil majors must "report promptly the progress of the directive," signalling a coordinated shutdown could disrupt the country's fuel supplies.