The Federal Government’s Naira-to-crude initiative, aimed at bolstering domestic refining capacity has been marred by inconsistent execution, causing local refineries to struggle for crude supplies to maintain operations, and raising concerns about Nigeria’s energy self-sufficiency.
In October 2024, the President Bola Tinubu-led administration announced a Naira-to-crude initiative through which local refineries, including the world’s largest single-train Dangote refinery, would receive crude oil supplies in the local currency.
However, findings by Nairametrics reveal that the implementation of this arrangement has been inconsistent, leaving local refineries struggling to secure adequate supplies, while Nigerians bear the brunt through high pump prices.
Sources within Nigeria’s midstream and downstream oil sector say crude supplies from the Nigerian National Petroleum Company Limited (NNPCL) to local refineries have been inconsistent and the President’s directive that the crude be sold in Naire is disregarded.
“Many refineries are struggling to get feedstocks. They are not benefitting from the Crude-to-Naira initiative,” said Eche Idoko, the Publicity Secretary of the Crude Oil Refiners Association of Nigeria.
“There is a progressive reduction” – Source
A reliable source in the Dangote Petroleum Refinery and Petrochemicals FZE described the update on crude supplies from the national oil firm as “a progressive reduction”.
- According to data from the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Dangote refinery is forecasted to refine 550,000 barrels per day and 17.05 million barrels per month, for the first half of the year.
- However, documents seen by Nairametrics show that the Dangote refinery is allocated only 61,290 barrels per day in February 2025 under the Naira-to-Crude arrangement.
- In the whole of February, the refinery has been allocated cargoes of 6.5 million barrels, while the allocation was reduced to 4.75 million barrels for March. Of the 4.75 million, only 1.9 million barrels were allocated for purchase in Naira, while the rest will be bought in US Dollars.
These allocations, albeit inconsistent, contradict the Federal Government’s claim that 450,000 barrels of crude oil will be sold to local refineries per day in Naira, out of which the Dangote refinery would receive 385,000 bpd (or 12 million barrels per month).
Could refurbishment of state-owned refineries be responsible?
Analysts anticipated the reduction in supplies to local private refineries following the Federal Government’s refurbishment of the Port Harcourt and Warri refineries with a combined refining capacity of over 200,000 barrels per day.
- However, in an exclusive chat with Nairametrics, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, assured that the national oil company was equipped to meet both local and international demands, noting that oil production has increased to 1.8 million barrels per day.
He said, “The production levels have improved significantly, with current outputs reaching approximately 1.8 million barrels per day, driven by the ongoing production ramp-up in the Upstream sector. This demonstrates NNPC’s strengthened capacity to fulfill its crude supply obligations, meeting the demands of both international partners and local refineries.
“NNPC, along with its Joint Venture (JV) partners and other producers under the Production Sharing Contracts (PSC) framework, is fully equipped to meet 100% of the local refineries’ demand as mandated by the Domestic Crude Supply Obligation (DCSO) regulations. These regulations ensure transactions are conducted under commercially favorable terms, adhering to a willing buyer, willing seller model.”
Crude imports rise as Dangote boosts capacity
However, available data contradicts the claims of NNPCL.
- Firstly, data from OPEC and the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) show that Nigeria’s average oil production was slightly below 1.5 million barrels in 2024.
- Also, the importation of crude oil has increased despite claims that production has increased. The Dangote refinery in its efforts to optimise its full capacity of refining 650,000 barrels per day has resorted to importing crude oil from the United States in the absence of sufficient supplies locally.
- Nairametrics reported that Nigeria imported 47,000 barrels per day of U.S. WTI crude in 2024, with a substantial share going to the Dangote refinery. In December 2024, Dangote Refinery got shipments of imported crude up to 358,000 barrels per day in December 2024, according to Tanker-tracking data compiled by Bloomberg.
- The Dangote refinery is expecting another shipment of 12 million barrels of crude oil from the U.S. this month, according to a report by Africa Report.
The giant refinery has helped Nigeria reduce its reliance on imported petroleum products, but it struggles to get supplies of feedstocks locally even though Nigeria is an oil-producing country.
Nigerians exposed to the volatility of the global oil market
The Naira-to-Crude initiative was supposed to help reduce pump prices of petroleum products and stabilise the Naira by reducing demand for foreign exchange in the local oil market.
“To ensure the stability of the pump price of refined fuel and the dollar-Naira exchange rate, the Federal Executive Council today adopted a proposal by President Tinubu to sell crude to Dangote Refinery and other upcoming refineries in Naira,” President Tinubu’s Special Adviser Bayo Onanuga stated in his announcement of the programme on his X page.
- However, the inconsistency of the implementation of the initiative and the continued reliance on forex in local oil trades have subjected Nigerians to price shocks in the global energy market. Therefore, when global oil prices soar, pump prices are increased at home, and vice versa.
- Petroleum Engineer and Oil and gas analyst, Dr Bala Zakka, said this situation is abnormal, stressing that citizens of an oil-producing country should not have to worry about the volatile international market. But most of Nigeria’s oil output is exported for revenue generation, while little or nothing is set aside by the government for citizens’ consumption.
“The crude oil you produce for internal consumption is not supposed to be tied to the international price. It has no relevance to the international price. And it is not being controlled by OPEC,” he said.
What you should know
- Nigeria is gradually becoming a petrol refining hub in West Africa thanks to the coming on stream of the Dangote refinery and other private and state-owned refineries in the country. However, private refineries struggle to get sufficient feedstocks for their operations.
- Nairametrics reported that the improving capacity of the Dangote refinery has helped Nigeria reduce fuel imports. Nigeria’s gasoline imports have dropped to the lowest in almost eight years.
- In addition to domestic supplies, the Dangote refinery is also exporting refined petroleum products to other countries, including Ghana, Togo, Cameroon, South Africa, Angola, and countries in Europe.
