Nigeria’s Naira-to-Crude initiative faces setbacks as local refineries struggle for supply

The Federal Government’s ambitious Naira-to-Crude initiative, designed to strengthen domestic refining capacity, is facing major hurdles due to inconsistent execution.

As a result, local refineries are grappling with crude shortages, threatening Nigeria’s energy self-sufficiency and keeping pump prices high.

In October 2024, the administration of President Bola Tinubu announced the Naira-to-Crude initiative, under which local refineries—including the world’s largest single-train Dangote refinery—would receive crude oil supplies in Naira.

However, industry findings reveal that the execution of this policy has been patchy, leaving refineries struggling to secure adequate feedstock.

Sources within Nigeria’s midstream and downstream oil sector report that crude supplies from the Nigerian National Petroleum Company Limited (NNPCL) to local refineries have been erratic, with the President’s directive to sell crude in Naira frequently ignored.

“Many refineries are struggling to get feedstocks. They are not benefiting from the Crude-to-Naira initiative,” said Eche Idoko, Publicity Secretary of the Crude Oil Refiners Association of Nigeria.

A source at the Dangote Petroleum Refinery and Petrochemicals FZE described crude supplies from NNPCL as experiencing a “progressive reduction.”

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According to data from the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Dangote refinery was projected to refine 550,000 barrels per day and 17.05 million barrels per month in the first half of 2025.

However, documents reveal that under the Naira-to-Crude arrangement, Dangote refinery was allocated only 61,290 barrels per day in February 2025.

In total, the refinery was allocated 6.5 million barrels for February and 4.75 million barrels for March. Of the March allocation, only 1.9 million barrels were sold in Naira, while the remainder was to be purchased in U.S. dollars.

This contradicts the Federal Government’s claim that 450,000 barrels of crude oil per day would be sold in Naira, with the Dangote refinery receiving 385,000 bpd (or 12 million barrels per month).

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Some analysts speculate that the reduction in crude supplies to private refineries may be linked to the government’s refurbishment of the Port Harcourt and Warri refineries, which have a combined refining capacity of over 200,000 barrels per day.

NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, reassured that the national oil company has the capacity to meet both local and international demand, citing an increase in crude oil production to 1.8 million barrels per day.

“The production levels have improved significantly, reaching approximately 1.8 million barrels per day due to ongoing upstream production ramp-up. This demonstrates NNPCL’s strengthened capacity to fulfill crude supply obligations to both international partners and local refineries,” Soneye said.

Soneye added that NNPCL, along with its Joint Venture (JV) partners and other producers under the Production Sharing Contracts (PSC) framework, is equipped to meet 100% of local refinery demand under the Domestic Crude Supply Obligation (DCSO) regulations.

However, data from the Organization of the Petroleum Exporting Countries (OPEC) and the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) show that Nigeria’s average crude production was slightly below 1.5 million barrels per day in 2024. Additionally, crude imports have risen despite claims of increased domestic production.

In response to inadequate local crude supplies, the Dangote refinery has resorted to importing crude oil from the United States to optimize its refining capacity of 650,000 barrels per day.

Nigeria imported 47,000 barrels per day of U.S. West Texas Intermediate (WTI) crude in 2024, with a large portion going to the Dangote refinery.

Tanker-tracking data compiled by Bloomberg shows that the Dangote refinery received shipments of up to 358,000 barrels per day of imported crude in December 2024. The refinery is expecting another 12 million barrels of crude oil from the U.S. this month, according to a report by Africa Report.

The Naira-to-Crude initiative was initially designed to reduce petroleum product pump prices and stabilize the Naira by decreasing foreign exchange demand for local oil transactions.

“To ensure the stability of the pump price of refined fuel and the dollar-Naira exchange rate, the Federal Executive Council today adopted a proposal by President Tinubu to sell crude to Dangote Refinery and other upcoming refineries in Naira,” Presidential Adviser Bayo Onanuga had announced.

Despite challenges, Nigeria is gradually emerging as a major refining hub in West Africa, thanks to the Dangote refinery and other private and state-owned refineries.

The increasing refining capacity has contributed to a decline in Nigeria’s fuel imports, which are now at their lowest level in almost eight years.

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