Nigeria’s Refinery Crisis Deepens as Oil Producers Accused of Crude Diversion
Nigeria’s battle to boost local refining capacity has taken a new turn, with petroleum retailers alleging that 500,000 barrels of crude oil allocated daily to domestic refineries are being diverted to international markets.
The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has commended the government’s decision to ban the export of crude allocated to local refiners, saying the move could finally end the racketeering that has crippled Nigeria’s refining industry.
“The exportation of crude oil meant for domestic refining has led to the abandonment of local refineries,” PETROAN’s Publicity Secretary, Joseph Obele, said in a statement. “It has been a major racketeering scheme, with producers and traders prioritising quick foreign exchange proceeds over local refining.”
Despite Nigeria’s vast oil reserves, the country remains heavily reliant on imported fuel, with many refineries unable to operate due to a chronic failure to meet domestic crude supply obligations.
A Sector in Crisis: Producers vs. Refiners
At a stakeholders’ meeting last weekend, attended by over 50 key industry players, refiners and producers traded blame over the failure of the domestic crude supply policy.
Oil producers argued that local refiners fail to meet commercial and operational terms, forcing them to seek international buyers to avoid operational bottlenecks. Refiners, however, accused producers of deliberately bypassing them, preferring to sell crude abroad rather than support Nigeria’s domestic refining ambitions.
The rift was laid bare last year when Aliko Dangote, President of the Dangote Group, accused international oil companies (IOCs) of prioritising crude sales to Asian countries, starving his $19bn, 650,000-barrel-per-day refinery of feedstock.
Amid the standoff, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) intervened, ordering oil producers to supply crude to Dangote and other local refineries. But the Independent Petroleum Producers Group (IPPG), representing Nigeria’s private oil producers, resisted the directive, warning against any attempt to force them into supply agreements.
The IPPG called on the Nigerian National Petroleum Company Limited (NNPC) to step in, arguing that NNPC, as Nigeria’s state-run oil firm, should be responsible for ensuring crude supply to local refiners.
Government Intervention and Lingering Challenges
In a bid to break the deadlock, President Bola Tinubu approved a policy mandating crude sales to local refineries, including Dangote. This naira-for-crude deal, launched in October 2023, was meant to ensure that Nigeria’s refineries received sufficient feedstock.
However, many industry experts remain sceptical. Despite the policy shift, reports indicate that local refiners, including Dangote, continue to struggle with crude shortages.
In a stark illustration of the crisis, Dangote Refinery is now importing 12 million barrels of crude oil from the United States, raising fresh concerns over Nigeria’s ability to sustain its own refining sector.
PETROAN’s National President, Billy Gillis-Harry, has urged the NUPRC to crack down on defaulters, including refineries, cargo vessels, and oil companies that sidestep the domestic supply mandate.
“The government’s policy is clear,” he said. “We must ensure compliance to guarantee sufficient refined petroleum products, lower fuel prices, and stabilise the market.”
Yet, with powerful interests on both sides, Nigeria’s struggle to free itself from fuel import dependence appears far from over.
About The Author
