Nigeria is considering changes to its crude oil allocation and pricing framework in a bid to improve access to feedstock for domestic refineries, including the 650,000-barrel-per-day Dangote Refinery.
The proposed reforms are aimed at addressing a persistent bottleneck in Nigeria’s refining industry: the difficulty local refineries face in securing sufficient Nigerian crude at competitive prices despite the country’s status as a major oil producer.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) supports the proposed changes, arguing that the current supply structure adds about $3–$4 per barrel to refining costs because of the involvement of intermediaries.
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Direct crude supply under consideration
One proposal being examined would allow oil producers affiliated with international oil companies to supply crude directly to nearby domestic refineries, reducing the number of intermediaries involved in the transaction.
Another option would provide discounts to refiners that collect crude directly from production sites. The proposed discount would reflect savings on transportation and handling costs already incorporated into international benchmark prices such as Brent.
The measures are particularly significant for the Dangote Refinery, Africa’s largest refinery, whose operations have faced challenges obtaining adequate domestic crude supplies.
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Domestic supply compliance improves
The Nigerian Upstream Regulatory Commission (NUPRC) says compliance with the country’s Domestic Crude Supply Obligation (DCSO) has improved substantially.
According to the regulator, producer compliance has risen to more than 90%, compared with below 43% previously.
Despite that improvement, the government and industry stakeholders still face questions over the availability, quality and pricing of crude suitable for individual refineries.
Recent NUPRC figures show the scale of the domestic supply effort. Dangote Refinery received 52.6 million barrels of crude in the second quarter, while overall DCSO performance reached 97.4%, according to industry data reported by Punch.
Why crude access matters?
Nigeria’s expanding refining capacity is expected to reduce dependence on imported petroleum products, retain more value from crude production within the country and strengthen domestic energy security.
However, inadequate or expensive feedstock can limit refinery utilisation and undermine those benefits. Local refiners therefore want a supply system that gives them more direct access to Nigerian crude while reducing unnecessary logistical and trading costs.
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The proposed reforms could also benefit smaller and independent refiners, rather than being limited to the Dangote facility, potentially creating a more competitive domestic refining market.
For the government, the challenge is balancing the interests of domestic refiners with those of crude producers, international oil companies and existing commercial arrangements.
The reforms remain under consideration, meaning the final structure, pricing mechanism and implementation timetable have yet to be determined. Reuters reported that crude quality and pricing adjustments remain among the issues requiring resolution.
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If successfully implemented, the changes could represent an important shift in Nigeria’s petroleum policy—from simply mandating domestic crude supply toward creating a more efficient commercial system capable of connecting producers directly with local refining capacity.
