Reported by: Oahimire Omone Precious | Edited by: Oravbiere Osayomore Promise.
Nigeria’s largest refinery, Dangote Refinery, which has the capacity to process about 650,000 barrels of crude oil per day and has played a central role in reducing the nation’s dependence on imported fuel, is facing a critical challenge in securing adequate feedstock under the federal government’s crude‑for‑naira policy.
Under the crude‑for‑naira arrangement, the refinery is supposed to receive between 13 and 15 cargoes of Nigerian crude oil each month. This deal was designed to allow Nigeria to refine its own crude domestically while paying in naira at full international benchmark prices, thereby reducing pressure on foreign exchange reserves and strengthening the domestic economy. However, officials within the refinery say that only five cargoes per month have been delivered under the programme, far below the agreed‑upon levels and significantly constraining the refinery’s operations.
Dangote Refinery has operated at full capacity since it became fully operational, producing petrol, diesel, kerosene, aviation fuel and other refined products not only for Nigeria’s domestic market but also for export across West Africa. The crude‑for‑naira initiative has been widely viewed as a key policy to support this drive, creating value within the country’s energy sector and stabilising the foreign exchange market. Proponents note that pricing crude in naira at international benchmarks, without introducing foreign exchange expenditure, has helped ease FX market pressures.
Despite the policy’s intentions, refinery executives, including Managing Director David Bird, have emphasised that the agreement has not been fully upheld, citing both volume shortfalls and issues related to quality allocation. According to sources close to the refinery’s management, regular access to 13 to 15 cargoes per month is essential to meet Nigeria’s fuel needs consistently. The shortfall means the refinery is operating below expected feedstock levels, reducing potential output and undermining some of the policy’s anticipated gains.
In practice, this shortfall has forced the refinery to depend on less predictable sources of crude from the Nigerian National Petroleum Company Limited, as well as occasional imports to fill the gap. Refinery officials note that inconsistent allocation can affect overall performance, complicate planning, and place undue pressure on supply chains that were designed to be supported through stable crude deliveries.
The crude‑for‑naira policy was crafted to improve domestic refining capacity and reduce reliance on costly imported refined products. By enabling payment for crude in naira, the arrangement was intended to support economic stability and help manage foreign exchange reserves more effectively. However, the gap between the planned allocation and actual deliveries has exposed vulnerabilities in the implementation of the policy.
Industry analysts say the ongoing shortfall highlights broader structural challenges within Nigeria’s oil sector, especially around coordinating upstream and downstream functions. Upstream crude production, which supplies the feedstock for refineries, has been constrained by infrastructure deficits, security challenges in oil‑producing regions, and operational inefficiencies. These factors contribute to fluctuating supplies and make consistent allocation more difficult.
Beyond volume concerns, refinery stakeholders have also pointed to crude quality as a critical factor in refinery performance. Refinery operations depend on stable and compatible crude grades; inconsistencies can force blending adjustments or introduce processing inefficiencies, which in turn can increase costs and affect output levels. Regular monthly dialogues between refinery technical teams and upstream suppliers aim to align crude specifications, but challenges remain.
The ongoing shortfall has also prompted calls for greater transparency in the crude allocation process. Stakeholders have urged the federal government to publish the methodology used to determine how crude is distributed among domestic refineries and export markets. A clear, rule‑based allocation framework is seen as necessary to ensure fairness, boost investor confidence, and provide greater predictability for planning and operations.
Nigeria’s state‑owned refineries have largely remained offline or underperforming, placing increased importance on the Dangote facility to meet both national demand and export commitments. This situation means that any disruption or inconsistency in crude supply can have ripple effects across fuel availability, pricing, and foreign exchange dynamics.
There have been attempts to strengthen and formalise crude supply arrangements. A two‑year agreement between the federal government, the national oil company and Dangote Refinery now allocates crude cargoes through 2027. However, the volume and regularity of deliveries under this agreement have not yet met expectations, leaving stakeholders to question the gap between policy design and execution.
In late 2025, the refinery briefly suspended the sale of petrol priced in naira when its crude‑for‑naira allocation was depleted. The move disrupted supply chains and underscored how sensitive operations are to crude feedstock flows. After intervention from government officials, petrol sales in naira resumed, illustrating both the importance of the policy and the challenges in sustaining it.
Experts argue that aligning crude supply with refining capacity requires a concerted effort across government agencies, the national oil company, and private sector partners. Strengthening upstream crude production, improving infrastructure, and developing a clear, transparent allocation regime are among the recommendations being discussed in industry forums.
As Nigeria continues to pursue greater self‑sufficiency in petroleum products and strives to become a regional energy hub, ensuring that key policies like crude‑for‑naira are implemented effectively remains essential. For Dangote Refinery, receiving the full complement of 13 to 15 monthly cargoes is not simply a contractual matter but a determinant of its ability to sustain production, contribute to national fuel security, and bolster economic resilience.
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