Nigeria's ambitious push to transform its oil sector from a crude exporter to a refining powerhouse is encountering a major hurdle: a chronic shortage of reliable crude oil supply. Despite the commissioning of the Dangote refinery and the revival of state-owned plants, operators warn that the country's downstream success is being undermined by an upstream crisis that threatens to derail years of progress.
The Independent Petroleum Producers Group (IPPG) has sounded the alarm, stating that domestic refineries could require over 1.5 million barrels of crude per day in the medium term. This demand is nearly equivalent to Nigeria's total liquids output of 1.68 million barrels per day in August, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). 'This is not a marginal demand adjustment,' IPPG chairman Adegbite Falade emphasized at the third Nigeria Oil Refining Summit, highlighting the precarious balance between refining needs and export obligations.
The paradox of Nigeria's energy sector has long been that it exports crude oil while importing refined products. However, recent developments—including the Dangote refinery's 650,000-barrel-per-day capacity and the resurgence of modular refineries—have begun to reverse this dynamic. Yet, the industry now grapples with a new challenge: ensuring a steady flow of crude to these facilities. 'We face difficulties accessing crude,' said modular refiners, underscoring the growing tension between downstream expansion and upstream constraints.
Falade, speaking at the summit organized by the Crude Oil Refiners Association of Nigeria (CORAN), warned that Nigeria's refining ambitions could falter if production does not keep pace. 'The answer to rising domestic refining demand is not merely to redistribute a limited pool of crude. The answer is to create more barrels,' he asserted, pointing to the country's vast reserves of 37.01 billion barrels of crude and 215.19 trillion cubic feet of natural gas. 'The challenge is not whether hydrocarbons exist underground, but whether we can convert them into production,' he added.
CORAN, which organized the summit, called for urgent reforms to address the 'incomplete gains' in the sector. Chairman Momoh Oyarekhua noted that while Nigeria has shifted from importing refined products to exporting them, domestic refineries still face 'difficulties accessing crude on commercially viable terms.' He criticized the persistence of fuel imports and underutilized refining capacity, particularly for modular refiners, whose smaller scale limits their bargaining power with upstream producers.
The association outlined a comprehensive list of demands, including the institutionalization of the Naira-for-Crude policy to ensure transparent access for domestic refineries. CORAN also urged the adoption of a domestic crude pricing template that accounts for quality, delivery points, and logistics costs. 'Our crude must increasingly power our refineries. Our refineries must increasingly supply our market,' Oyarekhua declared, advocating for a shift from export-centric policies to a domestic-focused strategy.
The Crude Oil Refiners Association of Nigeria (CORAN) has also called for stronger enforcement of the Domestic Crude Supply Obligation under Section 109 of the Petroleum Industry Act. This includes measures such as crude swaps and proximity-based supply, allowing producing assets near refineries to feed them directly without relying on distant export infrastructure. 'A barrel is not simply a barrel,' Falade explained, emphasizing the need for 'the right crude grade, in the right volume, of the right quality, delivered to the right location, at the right time and under the right commercial terms.'
Dangote Industries Ltd., which operates the country's largest refinery, has echoed these concerns. Group Chief Economist Hassan Mahmud stressed that the company is not seeking subsidies but 'predictability, transparency, and commercially workable arrangements' between producers and refiners. He argued that imported and locally refined products should compete under 'equivalent transparent regulatory, quality, tax, and commercial regimes,' rejecting the notion of replacing an import monopoly with a domestic one.
Mahmud also highlighted the need for infrastructure beyond refinery gates, criticizing the reliance on road transport for crude and refined products. 'Moving products mainly by road is costly, inefficient, and damaging to our infrastructure,' he said, advocating for pipelines, coastal distribution facilities, and storage terminals. He envisioned refining as a broader industrial enterprise, feeding petrochemicals, plastics, and fertilizers across West and Central Africa. 'Nigeria needs many successful refineries, large, medium, modular, and specialized,' he added.
The Major Energy Marketers Association of Nigeria (MEMAN) echoed the call for better market data. Chairman Huub Stokman urged greater visibility on production, available stocks, imports, and demand across products, arguing that this would enable participants to plan effectively and maintain adequate supply. 'There needs to be greater visibility on production, available stocks, imports and demand across products,' he said, emphasizing the importance of data-driven decision-making.
Industry leaders agree that the gap between refining ambitions and crude availability will shape the next phase of Nigeria's downstream reforms. Producers seek investment incentives and secure pipelines to boost output, while refiners demand firmer access to crude on workable terms. Marketers, meanwhile, prioritize stable, transparent supply. 'The answer is not merely to redistribute a limited pool of crude. The answer is to create more barrels,' Falade reiterated, framing the challenge as a test of Nigeria's ability to convert reserves into production.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that adherence to the domestic crude supply obligation rose to 97.4% in the second quarter, up from 41% in the first. However, Falade cautioned that 'commercially and logistically—[the system] is not yet there and certainly not by regulation alone.' He called for a shift from mandates to 'bankable contracts' and 'transparent market pricing,' stressing the need for a true domestic crude market.
The Petroleum Industry Act (PIA) has been credited with enabling some progress, including the removal of the petrol subsidy and the Naira-for-Crude initiative. However, industry stakeholders argue that more needs to be done to address systemic issues. 'Nigeria should not continue exporting crude, exporting jobs, and importing the same petroleum products at considerable economic cost,' Oyarekhua said, framing the issue as a matter of economic sovereignty.
As the sector navigates these challenges, the role of policy and infrastructure remains critical. The Dangote refinery's recent initial public offering (IPO) has signaled growing confidence in the sector, but its success depends on a stable supply chain. 'Policy certainty reduces risk, lower risk reduces the cost of capital, and lower financing costs ultimately improve the competitiveness of Nigerian refined products,' Mahmud said, underscoring the interdependence of regulation and market dynamics.
The path forward requires coordinated efforts between upstream producers, downstream refiners, and policymakers. With Nigeria's refining capacity poised to expand, the country must address the upstream constraints that could undermine its energy independence. 'Geologically, yes. Technically, yes. Commercially and logistically—[the system] is not yet there,' Falade concluded, leaving the industry to grapple with the urgent need for action.
The stakes are high: a failure to resolve the crude supply crisis could stall Nigeria's refining ambitions, perpetuate reliance on imports, and exacerbate economic vulnerabilities. As the sector moves forward, the focus will remain on transforming reserves into production, production into supply, and supply into a competitive downstream industry that meets domestic needs and drives regional growth.
The ongoing dialogue at the Nigeria Oil Refining Summit highlights the complexity of Nigeria's energy transition. While the country has made strides in reducing import dependence, the upstream challenges underscore the need for sustained investment, policy clarity, and infrastructure development. 'Our objective should not be to replace an import monopoly with a domestic monopoly,' Mahmud warned, advocating for a balanced approach that prioritizes transparency and fairness for all stakeholders.