Nigeria’s long-running struggle to translate crude oil abundance into domestic energy security resurfaced sharply in 2025, as local refiners continued to grapple with persistent feedstock shortages even while the country exported hundreds of millions of barrels to the international market.
Official data compiled from the Central Bank of Nigeria (CBN) show that between January and October 2025, Nigeria exported an estimated 306 million barrels of crude oil, representing nearly 70 per cent of total production within the period.
This development has intensified concerns among industry operators that export earnings continue to take precedence over domestic refining needs, despite regulatory safeguards designed to protect local supply.
Between January and October, Nigeria’s crude oil production averaged approximately 1.45 million barrels per day, translating to a cumulative output of about 443.5 million barrels.
However, the bulk of this volume was channelled to foreign markets, leaving roughly 137 million barrels theoretically available for domestic use — a figure refiners say is still insufficient in practice.
Refiners battle crude shortage under domestic supply framework
Under Nigeria’s Petroleum Industry Act, upstream producers are mandated to allocate a portion of their output to local refiners through the Domestic Crude Supply Obligation (DCSO).
The policy, enforced by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), was designed to strengthen national energy security, reduce fuel imports, and ensure that new and existing refineries operate optimally.
Yet, industry stakeholders argue that the policy’s effectiveness has been weakened by market realities, particularly the “willing buyer, willing seller” pricing framework, which allows crude to be sold at prevailing international prices.
According to refiners, this framework has tilted incentives in favour of exports, where payments are received in dollars, rather than domestic sales that are subject to forex constraints and price negotiations.
Export dominance leaves refineries underfed
A closer look at monthly data highlights the scale of the imbalance.
In January 2025 alone, Nigeria produced about 47.7 million barrels of crude oil, exporting nearly 33.8 million barrels within the same month.
Similar patterns persisted throughout the year, with exports closely tracking production volumes regardless of domestic demand pressures.
Even during months when production dipped — such as March and September — exports still accounted for a significant share of output.
Analysts note that this trend has left local refineries competing for limited allocations, often forcing them to operate far below installed capacity or halt production entirely.
The Dangote Petroleum Refinery, Africa’s largest single-train refinery, has repeatedly flagged crude supply challenges despite policy initiatives such as the naira-for-crude arrangement.
The refinery has had to source feedstock from the United States and neighbouring African countries, underscoring the severity of local supply constraints
Modular refineries bear the brunt
Smaller modular refineries have been hit even harder. The Crude Oil Refiners Association of Nigeria (CORAN) disclosed that several of its members experienced intermittent shutdowns in 2025 due to crude shortages.
Speaking on the issue, CORAN’s National Publicity Secretary, Eche Idoko, said many modular refineries are producing only a fraction of their installed capacities.
He cited cases where plants with capacities of about 10,000 barrels per day were operating at barely 10 per cent, while others were forced to suspend operations for months.
According to Idoko, the challenge is not technical capacity but access to feedstock. He warned that unless crude supply improves, Nigeria risks undermining the very investments made to boost local refining and reduce dependence on imported petroleum products.
Industry experts say pricing remains a core obstacle. Upstream producers naturally gravitate toward export markets where crude sales are settled in foreign currency and free from domestic payment risks.
Local refiners, on the other hand, often struggle to secure forex at competitive rates, making it difficult to match international offers.
This dynamic, analysts argue, creates a paradox where Nigeria possesses ample crude resources yet continues to import refined petroleum products due to underutilised domestic capacity.
Regulator’s response and lingering gaps
The NUPRC has acknowledged the challenges and previously warned that oil producers failing to meet their domestic supply obligations risk losing export permits.
The commission also revealed that in some instances, crude cargoes offered to local refiners were not fully taken up due to pricing disagreements and crude grade preferences.
While regulators insist that crude has been made available, refiners counter that commercial terms remain unfavourable, limiting their ability to lift allocated volumes.
Refiners battle crude shortage amid policy trade-offs
The broader picture painted by 2025 data suggests that Nigeria’s oil strategy remains heavily skewed toward export revenue, even as domestic refining capacity expands.
With external reserves and foreign exchange inflows closely tied to crude exports, policymakers face difficult trade-offs between short-term fiscal gains and long-term energy security.
Energy economist Professor Dayo Ayoade has urged the Federal Government to recalibrate crude allocation priorities, arguing that consistent feedstock supply is critical for sustaining refinery operations, stabilising fuel prices, and creating jobs across the downstream value chain.
As Nigeria positions itself as a refining hub in West Africa, stakeholders warn that resolving crude supply bottlenecks is no longer optional. Without decisive action, the country risks repeating a familiar cycle — exporting raw resources while domestic industries struggle to survive.
