The Federal Government of Nigeria has officially banned the export of crude oil designated for domestic refineries. This move is aimed at enhancing local refining capacity, reducing petroleum product imports, and easing pressure on foreign exchange reserves.
Previously, an estimated 500,000 barrels per day intended for domestic refining were being diverted to the international market, as producers and traders sought quick foreign exchange gains.
Strict Enforcement by NUPRC
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) announced that it will no longer approve export permits for crude oil cargoes meant for domestic refining. Any changes to these allocations will require explicit approval from the commission’s Chief Executive Officer.
In a letter dated February 2, 2025, addressed to oil exploration and production companies, NUPRC CEO Engr. Gbenga Komolafe warned that diverting crude oil meant for local refineries violates the Petroleum Industry Act (PIA) 2021.
Industry Dispute Over Domestic Crude Supply
A recent meeting involving over 50 key industry players revealed conflicts between refiners and producers regarding the Domestic Crude Supply Obligation (DCSO) policy.
- Refiners accused producers of failing to meet supply agreements and preferring to sell crude internationally.
- Producers countered that refiners struggle to meet commercial and operational terms, forcing them to seek alternative markets.
Despite these disagreements, both parties acknowledged that NUPRC has implemented measures to ensure compliance with the DCSO policy.
Legal Framework and Government’s Commitment
Under Section 109 of the PIA 2021, crude oil producers are required to prioritize supplying domestic refineries before exporting any surplus. NUPRC has already taken regulatory actions to enforce compliance, including:
- Implementation of the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023.
- Establishment of a DCSO framework and procedural guide for enforcement.
This policy also supports the Naira-for-Crude initiative, which mandates that local refineries pay for crude oil in naira, ensuring that refined products are sold in the local currency.
Refineries’ Crude Oil Needs
NUPRC disclosed that Dangote Refinery and seven other refineries require 770,500 barrels per day (bpd) in the first half of 2025. The breakdown of their crude needs includes:
- Dangote Refinery – 550,000 bpd
- Port Harcourt Refinery – 60,000 bpd
- Warri Refinery – 75,000 bpd
- Kaduna Refinery – 66,000 bpd
- Smaller refineries (OPAC, WalterSmith, Duport, Edo, and Aradel) – Combined 19,500 bpd
This allocation represents 37% of Nigeria’s projected daily crude production of 2.07 million bpd for the first half of 2025.
Nigeria’s Oil Production Trends
Nigeria’s daily average oil production increased 7.38% year-on-year in December 2024, reaching 1.667 million bpd, including condensates. However, this was below the 1.7 million bpd budget benchmark and the 1.5 million bpd OPEC quota.
The highest oil output in December 2024 came from:
- Forcados Terminal – 8.49 million barrels
- Bonny Terminal – 7.78 million barrels
- Qua Iboe Terminal – 4.15 million barrels
Industry Reactions and Economic Impact
- NNPCL’s Position: The Nigerian National Petroleum Company Limited (NNPCL) reaffirmed its commitment to local refining, stating that ensuring a stable supply of crude to domestic refineries is crucial for energy security and foreign exchange stability.
- Economic Experts: Analysts praised the ban, stating that local crude sourcing would reduce forex demand, stabilize fuel prices, and enhance economic resilience.
- Regulatory Challenges: Some experts warned that strict enforcement and political will are needed to make the policy effective.
Oil Prices and Market Trends
Meanwhile, global oil prices surged, with Brent crude hitting $76.45 per barrel, following supply concerns. Nigeria’s Bonny Light crude also recorded gains, reflecting the global market’s reaction to trade policies and supply disruptions.
Conclusion
The Federal Government’s decision to ban crude oil exports intended for local refining marks a major step toward self-sufficiency in petroleum refining. If properly enforced, this policy could strengthen Nigeria’s energy sector, improve the naira’s stability, and reduce dependence on imported fuel.
