The Naira-for-Crude initiative, designed to supply local refineries with crude oil in Naira and facilitate the sale of refined products to marketers in the local currency, is facing significant challenges due to inadequate crude supply, findings reveal.
Government’s Naira-for-Crude Initiative
President Bola Ahmed Tinubu had mandated the sale of crude oil to Nigerian refineries, including the Dangote Refinery, in Naira as part of a strategy to reduce the cost of Premium Motor Spirit (PMS), commonly known as petrol. In October 2024, the Federal Executive Council (FEC) approved the allocation of 450,000 barrels of crude oil for domestic consumption, with Dangote Refinery serving as the pilot project.
Under this scheme, which commenced in early October 2024, the Nigerian National Petroleum Corporation Limited (NNPCL) was expected to supply 385,000 barrels per day (bpd) to the 650,000 bpd-capacity Dangote Refinery in Ibeju-Lekki, Lagos. However, findings indicate a persistent shortfall in crude supply, forcing the refinery to resort to importation.
Crude Supply Shortfalls Persist
Despite Nigeria’s crude oil production reaching 1.8 million barrels per day (mbpd) by the end of 2024, supply to local refineries has not seen a corresponding increase. Official documents show that for February 2025, only four cargoes have been allocated under the scheme, with March receiving just two cargoes—amounting to a total of 1.9 million barrels for the two months. This translates to a daily allocation of 61,290 barrels, far below the 385,000 bpd target.
To compensate for the shortfall, the Dangote Refinery is set to receive 12 million barrels of crude from the United States to maintain operations and work toward full refining capacity.
Heavy Importation Continues
Meanwhile, petroleum product imports remain high, with the NNPC and marketers spending over N5 trillion on importing PMS and diesel (AGO) within 110 days. According to motor tanker vessel reports from the Nigerian Ports Authority (NPA), between October 1 and December 31, 2024, Nigeria imported:
- 2,846,499.41 metric tonnes of PMS
- 791,619.00 metric tonnes of diesel
From January 1 to 29, 2025, an additional:
- 342,199 metric tonnes of PMS
- 146,866 metric tonnes of AGO
were imported. Using conversion factors (1,341 litres per metric tonne for PMS and 1,176 litres per metric tonne for AGO), this translates to over 4.2 billion litres of PMS and 1.1 billion litres of diesel imported in 121 days.
At an average landing cost of N940 per litre for PMS and N920 per litre for AGO, Nigeria has spent more than N4.019 trillion on petrol imports and N1.015 trillion on diesel imports during this period. Industry insiders argue that this heavy reliance on importation, despite available refining capacity, undermines local refiners—especially the Dangote Refinery.
Industry Experts Weigh In
An oil and gas expert within the public sector, speaking on condition of anonymity, warned that the continued supply shortfalls could jeopardize the Naira-for-Crude initiative and weaken Nigeria’s energy security.
He stated: “The refineries pay fully for crude at international rates but in Naira. Selling refined products to marketers in Naira eliminates forex risks and reduces dependence on the US dollar for domestic transactions.”
He further emphasized the policy’s importance: “By aligning domestic transactions with Naira payments, the government is reducing its reliance on foreign exchange, particularly in the oil sector, where significant foreign reserves have historically been used for imports.”
Additionally, Dr. Ayodele Oni, another oil and gas expert, attributed the crude supply constraints to forward sale arrangements and divestment by International Oil Companies (IOCs). He stressed the need for increased production to sustain the initiative, questioning the rationale behind continued imports despite Nigeria’s expanded refining capacity through Dangote, Aradel, and the recently revived government-owned refineries.
Dangote Refinery’s Position
A source at the Dangote Refinery, speaking anonymously, reaffirmed the company’s commitment to selling refined products in Naira and maintaining uniform pricing across Nigeria.
He stated: “The refinery assumes an equalisation role, typically undertaken by the government, to ensure price stability. Our partners, including MRS, Heyden, and Ardova, have embraced this model. The Petroleum Products Retail Outlet Owners Association has also partnered with us to distribute PMS nationwide at uniform prices.”
The Naira-for-Crude initiative remains a crucial component of Nigeria’s economic reforms. However, persistent crude supply constraints threaten its success. With local refining capacity in place, experts argue that prioritizing domestic refineries over importation is key to achieving long-term energy security and economic stability.
