By Ali Elias
The Dangote Petroleum Refinery and several modular refineries in Nigeria may need to spend approximately $8.56 billion to import an estimated 122.4 million barrels of crude oil over six months to maintain full operational capacity. This equates to about $1.43 billion per month in crude oil importation costs, highlighting the ongoing challenges facing Nigeria’s domestic refining sector.
Challenges in Domestic Crude Supply
The need for imports stems from uncertainties surrounding the Nigerian National Petroleum Company Limited’s (NNPCL) naira-for-crude policy and the Federal Government’s Domestic Crude Supply Obligation. An expected meeting between the Technical Sub-Committee on the policy, Dangote Refinery, and government officials did not hold as planned, with sources indicating a possible rescheduling before the Sallah holiday.
A senior government official revealed, “The Nigerian Petroleum Upstream Regulatory Commission (NUPRC) is not done with the assignment given to it by the committee. Hence, the meeting could not be held today. They are asking for more time.”
Refineries Relying on Imports
The 650,000-barrel-per-day (bpd) Dangote Refinery has been importing crude and will continue to do so amid these uncertainties. Similarly, the Edo Refinery, aiming to expand its capacity to 30,000 bpd, is in talks with U.S. suppliers for crude offtake.
Industry data shows that Dangote and Edo refineries require about 680,000 bpd, translating to 20.4 million barrels per month and 122.4 million barrels over six months. At an average Brent crude price of $70 per barrel, this would cost approximately $8.56 billion.
Modular Refinery Operations in Jeopardy
Eche Idoko, National Publicity Secretary of the Crude Oil Refinery-Owners Association of Nigeria, disclosed that many modular refiners are struggling due to limited access to domestic crude. “Edo refinery is negotiating with U.S. suppliers, while others, apart from Walter Smith and Aradel, are effectively stranded. Some modular refineries have been unable to refine a single litre for the past six to eight months.”
Currently operational modular refineries include Walter Smith, Aradel, Omsa Pillar Astex Company, Edo, and Duport refineries, while Clairgold and Azikel refineries remain under construction. The government’s failure to allocate sufficient feedstock is seen as a setback to stabilizing the sector, with political ramifications ahead of the 2027 elections.
Crude Allocation Constraints and Financial Struggles
The naira-for-crude arrangement was expected to support local refiners, but sources indicate that the NNPCL has allocated substantial crude volumes to foreign creditors to settle loans, limiting supply to domestic refineries. Reports show that 8.17 million barrels of crude are pledged monthly for different loan agreements, alongside an additional $9.5 billion forward oil sales deal.
Following failed negotiations, the Dangote Refinery announced a temporary halt to petroleum product sales in naira, citing an imbalance between sales revenue and crude purchase obligations in U.S. dollars. “To date, our sales of petroleum products in naira have exceeded the value of naira-denominated crude we have received,” the company explained, justifying its switch to dollar-based transactions.
Market Impact and Fuel Price Hikes
The fallout has led to rising fuel prices, with private depot owners in Lagos increasing loading costs. In the Federal Capital Territory, retail fuel prices surged by ₦42 per litre (4.67%), reaching ₦940 per litre at select stations. Conoil along Airport Road raised its price to ₦940, AYM Shafa and Matrix to ₦920, while Salbas set its rate at ₦930 per litre. NNPCL and MRS stations, selling at ₦880 per litre, experienced long queues.
Depot prices also increased, with Rainoil, WOSBAB, Pinnacle, Aiteo, and Nipco raising their rates from ₦856–₦860 per litre to ₦870.
Outlook
The inability of local refineries to access domestic crude raises concerns about Nigeria’s refining sector’s sustainability. With continued reliance on expensive imports, the long-term economic impact could be severe, particularly if the government fails to stabilize crude supply and support domestic refining operations. The upcoming committee meeting will be crucial in determining the next steps for Nigeria’s energy sector.