Refinery Owners Raise Alarm Over Crude Oil Supply Crisis at Local Refineries

• Refinery owners in Nigeria are struggling to get crude oil because producers prefer selling to international buyers who pay in dollars
• The refiners lament that despite government policies like the Domestic Crude Supply Obligation and naira-for-crude deals, enforcement has been weak
• CORAN warned that without fair pricing, reliable supply, and forex support, local refiners face serious risks that could drive away investment

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology, Banking and the Economy.

Owners of crude oil refineries in Nigeria are complaining that they can’t get enough crude oil to run their businesses. They say oil producers prefer selling to international buyers who pay in dollars, rather than to local refineries.

Eche Idoko, spokesperson for the Crude Oil Refinery Owners Association of Nigeria (CORAN), said in a statement that although the Petroleum Industry Act (PIA) of 2021 was meant to support local refining, the implementation has been unclear and inconsistent.

The Nigerian government had promised to supply crude to local refineries through two programmes: the Domestic Crude Supply Obligation (DCSO) and the Domestic Crude Refining Requirement (DCRR).

However, Idoko said these plans have not been properly enforced, and most refineries, except the Dangote refinery, still can’t get the crude they need.

He said the policy of “willing buyer, willing seller” was supposed to encourage competition, but in reality, it makes things harder for local refineries.

Since producers want to sell at international prices, local refiners who depend on the naira and struggle to get dollars can’t afford to buy crude oil.

He said:

“Upstream producers prefer to sell to international buyers who pay dollar-denominated prices, while local refiners, constrained by domestic currency fluctuations and access to forex, often cannot compete."

Even though the DCSO reserved about 385,000 barrels of oil per day for local use, especially for the Dangote refinery, actual deliveries have been far below that.

According to Punch, in February 2025, only four shipments were made, and just two in March, totalling about 950,000 barrels — only 16% of the promised amount.

Naira-for-crude policy favours only Dangote

Idoko also criticised the 2024 naira-for-crude policy, which was designed to help local refineries avoid forex problems. Currently, only the Dangote refinery benefits from it because it produces petrol.

He warned that this could lead to a monopoly and prevent other refineries from growing.

He explained that tying crude prices to global benchmarks like Brent or WTI doesn't work for Nigerian refiners, who face high costs and limited access to dollars.

The spokesperson for CORAN said that investors in refineries need a steady and affordable supply of crude oil to stay in business. He warned that the current system doesn’t offer long-term contracts that can be enforced.

He also pointed out that selling refined products in naira while buying crude oil priced in dollars puts local refiners at serious risk due to changes in the exchange rate.

To solve this, Idoko recommended that the government:

• Introduce a balanced pricing model that uses global prices but includes fair discounts for local refiners.
• Extend the naira-for-crude deal to all licensed local refineries, not just those making petrol.
• Change parts of the Petroleum Industry Act to clearly state supply amounts, timelines, and penalties for non-compliance.
• Create special forex arrangements to help refineries deal with exchange rate issues.

He warned that without an affordable and steady crude supply, refinery businesses could fail and investment in the sector could dry up.

FG issues additional refinery licenses

In related news, the Nigerian government issued 47 Licenses to Establish (LTE) and 30 Licenses to Construct (LTC) refineries over the past year.

This initiative, as reported by Legit.ng, is aimed at boosting the country's refining capacity and ensuring a consistent supply of petroleum products.

Farouk Ahmed, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), stated that these 47 licenses are projected to deliver a combined refining capacity of nearly three million barrels per day.

Source: Legit.ng