The Federal Government is weighing a reduction in the daily crude oil allocation to Dangote Refinery, currently set at 300,000 barrels, unless Nigeria’s oil production sees a substantial increase, according to a report by The PUNCH on Wednesday. This adjustment forms part of the government’s “naira-for-crude” initiative, which coincides with the recent operational kick-off of the Warri and Port Harcourt refineries, collectively processing around 135,000 barrels per day.
The Warri and Port Harcourt refineries, which had been neglected for years, are now back in operation under the management of the Nigerian National Petroleum Company Limited (NNPCL). Previously, the country’s fuel demand had been primarily met through imports. The proposed reduction in crude allocation to Dangote Refinery is designed to ensure a more balanced distribution of crude oil among the various local refineries, ultimately encouraging greater competition within Nigeria’s downstream sector.
The “naira-for-crude” initiative, which began last year, initially allocated 450,000 barrels per day to domestic refineries, with Dangote Refinery receiving 300,000 barrels during its six-month pilot phase. As the Warri and Port Harcourt refineries are now functioning, and with the addition of facilities like the Kaduna and BUA refineries expected to join the network soon, it is likely that Dangote Refinery will see a reduction in its crude oil allocation.
A source familiar with the matter revealed that the current allocation of 300,000 barrels per day to Dangote Refinery will need to be divided among all the refineries, given the rising demand. The source stressed that an increase in Nigeria’s crude oil production is the only sustainable solution to meet this growing demand.
The “naira-for-crude” initiative was launched to help mitigate foreign exchange fluctuations and bring down the cost of petrol. According to the Crude Oil Refinery Owners Association of Nigeria (CORAN), the program has contributed to lowering fuel prices, with further reductions expected as the country’s refining capacity grows. CORAN has also called for an increase in crude oil production to meet the rising demand for locally refined products.
Additionally, the NNPCL has stopped selling crude oil to local refineries on credit, opting for upfront payment to help boost government revenue. This change in policy has faced criticism from some refiners, who argue that it could put additional strain on their operations. In the case of Dangote Refinery, which has an optimal refining capacity of 650,000 barrels per day, a reduction in local crude supply may force the refinery to seek crude imports at international market prices.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) estimates that local refineries, including Dangote, Warri, and Port Harcourt, will require over 123 million barrels of crude oil between January and June 2025. To meet this demand, the government aims to ramp up daily crude production to over 2 million barrels through initiatives such as Project 1 Million Barrels.
This drive to enhance domestic refining capacity is aligned with Nigeria’s broader strategy of reducing its dependence on imported petroleum products and achieving self-sufficiency in fuel production. The first half of 2025 is expected to see increased collaboration between upstream oil producers and local refineries, marking a significant step toward building a more sustainable petroleum industry in Nigeria.
