Nigeria is considering changes to its crude oil allocation and pricing rules to improve access to feedstock for domestic refineries, including the Dangote Refinery. This comes as the country seeks to strengthen local refining and reduce reliance on imported petroleum products.
The proposed reforms would allow crude producers linked to international oil companies to supply nearby domestic refineries directly, reducing the number of intermediaries involved in transactions between producers and refiners.
Another proposal would allow refiners that collect crude directly from production sites to receive discounts reflecting savings on transportation and handling costs that are normally incorporated into benchmark crude prices.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) supports the proposed changes, saying the existing system adds about $3 to $4 per barrel to refining costs because of middlemen involved in the supply chain.
The reforms come at a time when Nigeria’s refining industry is expanding rapidly following the emergence of the Dangote Refinery and the return of other domestic plants to production. Ensuring adequate and competitively priced crude supplies has become increasingly important as refiners seek to operate at higher capacity.
Under Nigeria’s domestic crude supply obligations, oil producers are required to make crude available to local refineries. However, compliance was weak earlier this year, with producers supplying less than half of the volumes allocated to domestic refiners during the first quarter.
The Nigerian Upstream Regulatory Commission (NUPRC) said compliance has since improved significantly, reaching more than 90%.
Despite the improvement, disagreements over crude pricing and quality have continued to complicate transactions between producers and refiners. Refiners have argued that the current pricing structure can make locally sourced crude less competitive than imported alternatives.
The government is therefore considering adjustments that could reduce logistical costs and make domestic crude more attractive to Nigerian refiners while preserving incentives for oil producers.
The reforms could particularly benefit the Dangote Refinery, Africa’s largest refinery, which has a processing capacity of 650,000 barrels per day. Greater access to domestic crude could help the facility operate more consistently while supporting its expansion into regional export markets.
For Nigeria, increasing domestic refining would reduce demand for imported petroleum products, retain more value within the local economy and create a larger market for the country’s crude production.
The government is also seeking to increase crude production, making the availability of domestic feedstock a central part of its strategy to build a more integrated oil industry.
However, outstanding issues around crude quality, pricing and commercial terms will need to be resolved before the proposed reforms can deliver their full benefits.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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