Proposals to Cut Feedstock Costs
The Federal Government is reviewing crude allocation and pricing rules to improve feedstock access for local refiners. According to the Crude Oil Refinery-owners Association of Nigeria (CORAN), these changes aim to resolve supply bottlenecks under the Domestic Crude Supply Obligation (DCSO) framework.
The 650,000 barrels-per-day Dangote Refinery has experienced difficulties securing sufficient domestic crude. The refinery reported that Nigeria's current pricing structure adds $3 to $4 per barrel to feedstock costs because purchases route through producers' trading arms.
CORAN spokesperson Eche Idoko stated that one proposal allows producers linked to international oil networks to deliver crude directly to nearby refineries, with volumes reconciled later at the terminal. Another proposal introduces a discount for refiners lifting crude directly from production facilities, reflecting freight and handling costs embedded in Brent-linked pricing that refiners do not actually incur.
Domestic Supply Compliance and Shortfalls
In May, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that Nigeria supplied 28.5 million barrels of crude to domestic refineries in Q1 2026. This volume fell significantly short of the 61.9 million barrels allocated for the period.
While producer compliance with the DCSO framework rose to over 90% from less than 43% in the prior quarter, this metric measures actual deliveries against allocations rather than met refinery demand. In March, Dangote Refinery CEO David Bird expressed concerns over a major shortfall in the Crude-for-Naira programme, noting the refinery received only 5 crude cargoes instead of the allocated 15.
Alternative Pricing and Revenue Projections
In April, Financial Derivatives Company Managing Director Bismarck Rewane proposed a refinery-based subsidy model. This model suggests the government supply crude to domestic refiners at controlled prices to ensure cheaper retail petroleum products for consumers.
Meanwhile, the Nigerian Economic Summit Group (NESG) projected that prolonged Middle East tensions could yield up to N30.2 trillion in oil windfalls for Nigeria.
