The Dangote Petroleum Refinery and other modular refineries in Nigeria are set to spend an estimated $8.56 billion over the next six months on crude oil imports, following the collapse of the federal government’s naira-for-crude policy. This means refiners will have to spend approximately $1.43 billion monthly to keep their operations running.
The failure of the crude supply agreement between the Nigerian National Petroleum Company Limited (NNPCL) and local refiners has left domestic producers in a tight spot, forcing them to seek alternative crude sources. Amid these uncertainties, concerns continue to mount over the sustainability of the domestic crude supply obligation initially promised by the government.
The $19 billion Dangote Refinery, with a capacity of 650,000 barrels per day, has long signaled its intent to import crude to sustain operations. However, with the government failing to supply local crude under the naira-for-crude policy, the refinery has no choice but to increase its reliance on imports.
Industry insiders have confirmed that the technical subcommittee overseeing the naira-for-crude arrangement failed to hold a scheduled meeting on Monday, delaying potential solutions. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which was expected to provide critical data to the committee, reportedly requested more time to finalize its report.
The Edo Refinery, which has a production capacity of 30,000 barrels per day, is also making efforts to secure crude oil from international markets. Sources familiar with the refinery’s operations revealed that discussions are ongoing with a US-based crude supplier to ensure the plant’s continued operations.
Findings indicate that while several modular refineries are struggling to stay afloat, the Dangote and Edo refineries alone will require approximately 680,000 barrels per day of crude oil. This equates to about 20.4 million barrels per month and 122.4 million barrels over six months. At an average global crude price of $70 per barrel, the total cost of these imports will reach $8.56 billion within that period.
The situation is dire for many modular refiners who lack the financial strength to source crude internationally. The National Publicity Secretary of the Crude Oil Refinery-Owners Association of Nigeria (CORAN), Eche Idoko, confirmed that several refiners have remained non-operational for months due to crude shortages.
According to Idoko, only a handful of refiners—such as Walter Smith Refinery and Aradel Refinery—are managing to operate, thanks to crude sourced from their oil fields. However, other modular refineries, including Omsa Pillar Astex Company, Edo Refinery, and Duport Refinery, are struggling due to inconsistent crude supplies.
“The failure of the government to allocate sufficient crude to domestic refineries has derailed efforts to stabilize the sector,” Idoko stated. “This situation not only undermines investor confidence but also poses political risks ahead of the 2027 elections.”
The collapse of the naira-for-crude deal has led to immediate repercussions in the petroleum market, with private depot owners in Lagos and other parts of the country increasing petrol prices. Fuel stations in Abuja have also raised prices by as much as N42 per liter, with Conoil now selling at N940 per liter, while AYM Shafa and Matrix outlets have set their prices at N920 per liter.
Despite these price hikes, NNPCL and MRS filling stations are still selling fuel at N880 per liter, leading to long queues at their outlets. Depot price analyses indicate that major suppliers, including Rainoil, WOSBAB, Pinnacle, Aiteo, and Nipco, have adjusted their rates upward, further worsening the cost burden on consumers.
Sources familiar with the crude allocation challenges reveal that NNPCL has already committed large volumes of crude to foreign creditors in order to service its outstanding debts. Reports from the Nigeria Extractive Industries Transparency Initiative (NEITI) and NNPCL’s 2023 financial statements show that about 8.17 million barrels of crude are pledged monthly for debt settlements. Additionally, the company has engaged in a forward oil sales deal worth $9.5 billion, limiting the crude available for domestic refiners.
As a result of these financial obligations, NNPCL is struggling to meet domestic crude supply demands, thereby worsening the crisis in the refining sector.
With local refiners turning to crude imports, fears are growing that Nigeria may face an extended period of fuel price volatility. Experts warn that continued reliance on imported crude could significantly impact the cost of refined petroleum products, further burdening consumers already struggling with economic hardships.
