FG considers new crude rules as refiners battle high feedstock costs

The Federal Government is considering changes to crude allocation and pricing rules to improve feedstock access for Nigerian refiners, including the Dangote Refinery, the Crude Oil Refinery-owners Association of Nigeria (CORAN) has said.

According to a Reuters’ report, the proposed changes are expected to address the cost and supply challenges facing local refiners as Nigeria seeks to improve domestic crude supply under its Domestic Crude Supply Obligation (DCSO) framework.

Dangote Refinery has previously said Nigeria’s pricing structure adds between $3 and $4 per barrel to refiners’ feedstock costs because crude purchases are routed through producers’ trading arms.

The proposed changes could support operations at the 650,000 barrels-per-day Dangote Refinery, Africa’s largest refinery, which has at times faced difficulties securing sufficient crude supplies domestically.

What the report is saying

CORAN, as quoted by Reuters, said the proposed changes are expected to be discussed this week during a regulator-led review of Nigeria’s domestic crude supply obligation, which requires producers to supply local refiners before exporting.

• CORAN spokesperson Eche Idoko said one proposal would allow a producer linked to an international oil company’s network to deliver crude directly to a nearby refinery, with the volumes reconciled later at the terminal.
• Idoko said the arrangement would reduce reliance on trunklines and bring crude closer to refiners.
• Another proposal would allow refiners that lift crude directly from production facilities to receive a discount reflecting freight and handling costs embedded in Brent-linked pricing but not actually incurred by the refiners.
• “This could be a win-win for both the producers and refiners,” Idoko said.

The proposals are aimed at improving the way domestic crude is allocated and priced while reducing some of the costs associated with supplying local refineries.

Get up to speed

In May, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) stated that Nigeria supplied 28.5 million barrels of crude oil to domestic refineries in the first quarter of 2026, significantly below the 61.9 million barrels allocated for the period.

• NUPRC’s latest data showed producer compliance with the domestic crude supply framework rose to more than 90%, from less than 43% in the previous quarter.
• The compliance metric measures actual deliveries against volumes allocated by the regulator, rather than the amount of refinery demand that was met.
• Under the framework, producers are required to offer allocated volumes to local refineries, while sales are agreed on a “willing-buyer, willing-seller” basis.
• Dangote Refinery CEO David Bird raised concerns in March over a significant shortfall in crude allocations under the Federal Government’s Crude-for-Naira programme.

The improvement in compliance therefore does not necessarily mean that refiners are receiving all the crude they require to operate at full capacity.

What you should know

In April, renowned economist and Managing Director of Financial Derivatives Company, Bismarck Rewane, proposed a shift in Nigeria’s fuel subsidy framework, advocating a refinery-based model that channels benefits directly to consumers.

Rewane explained that the proposed model would involve the government supplying crude oil to domestic refiners at a controlled price, while ensuring that refined petroleum products are sold to consumers at lower rates.

The Nigerian Economic Summit Group (NESG) had projected that escalating geopolitical tensions in the Middle East could deliver a massive oil revenue windfall to Nigeria, potentially reaching as high as N30.2 trillion if the conflict between Iran and Israel becomes prolonged.