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Oil sale in Naira: Shocker as producers, traders divert, sell crude oil approved for local refineries

The Federal Government has taken a decisive step to strengthen Nigeria’s oil sector by banning the export of crude oil meant for local refineries. This policy aims to improve domestic refining, reduce fuel imports, and ease pressure on the country’s foreign exchange reserves.
For years, about 500,000 barrels of crude oil per day meant for domestic refining had been diverted to the international market. Producers and traders preferred to sell abroad, taking advantage of the quick foreign exchange earnings. However, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has now made it clear that such practices will no longer be tolerated. The agency has warned that crude oil designated for local refineries must not be exported without express approval.
In a letter dated February 2, 2025, the Chief Executive of NUPRC, Engr. Gbenga Komolafe reminded oil producers and their partners that diverting crude oil meant for local refineries is against Nigerian laws. He referred to Section 109 of the Petroleum Industry Act (PIA) 2021, which mandates a steady crude supply to domestic refineries to enhance energy security.
During a recent high-level meeting, over 50 key industry players gathered to discuss the issue. Refiners accused producers of favouring foreign buyers, leaving them struggling to get crude oil for their operations. On the other hand, producers claimed that refiners often failed to meet commercial and operational agreements, forcing them to seek other markets. With the government now stepping in, both sides must comply with the new directive.
This policy is part of the government’s Naira-for-Crude initiative, which requires local refineries to purchase crude oil in naira instead of dollars. The aim is to ensure a steady supply of crude oil for Nigerian refineries, reduce the country’s reliance on imported fuel, and decrease the demand for dollars, thereby easing pressure on foreign exchange rates.
According to industry sources, major crude producers like Shell, Chevron, and Seplat Energy will now be expected to prioritize supplying local refiners under the new regulation.
How Much Crude Do Local Refineries Need?
Nigeria’s refineries require 770,500 barrels per day (bpd) to meet production demands for the first half of 2025. The breakdown of crude oil requirements per refinery includes:
• Dangote Refinery – 550,000 bpd
• Port Harcourt Refinery – 60,000 bpd
• Warri Refinery – 75,000 bpd
• Kaduna Refinery – 66,000 bpd
• OPAC Refinery (Delta State) – 5,000 bpd
• WalterSmith Refinery (Imo State) – 4,500 bpd
• Duport Midstream (Edo State) – 2,000 bpd
• Edo Refinery – 1,000 bpd
• Aradel Refinery (Rivers State) – 7,000 bpd
This crude allocation accounts for 37% of Nigeria’s projected daily crude production of 2,066,940 bpd in the first half of 2025.
The NUPRC has warned oil producers not to alter their Domestic Crude Supply Obligation (DCSO) agreements without official approval. To ensure compliance, the agency has introduced the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023, alongside a DCSO implementation guide.
With the government determined to stop crude oil diversions and promote transactions in naira, the Nigerian oil market is undergoing a major transformation. Whether this policy will stabilize fuel supply and strengthen the naira in the long run remains to be seen. However, one thing is clear—Nigeria’s oil sector is set for a new era of accountability.

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Written by Olusesan Oba

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