In a significant move to strengthen Nigeria's local refining capacity and minimize the country’s reliance on imported petroleum products, the Federal Government has imposed a ban on the export of crude oil that is allocated for domestic refineries.
The directive comes as part of efforts to alleviate pressure on Nigeria’s foreign exchange reserves, which have long been under strain due to the heavy reliance on imported refined oil products. This ban is aimed at ensuring more crude oil is processed within the country rather than diverted to international markets, where traders and producers had been selling an estimated 500,000 barrels per day (bpd) that should have been used for local refining.
Over the years, various reports indicate that crude oil meant for domestic refining was being diverted to international markets, where producers could fetch higher prices, contributing to a shortfall in local fuel production. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has now stepped in to implement this policy, declaring that crude oil allocated for local refineries will no longer receive export permits. This policy will require modifications to the allocations to be approved directly by the NUPRC’s Chief Executive Officer.
Government Moves to Prevent Diversion
In a letter issued on February 2, 2025, the NUPRC’s Chief Executive, Engr. Gbenga Komolafe, addressed exploration and production companies, along with their equity partners. He emphasized that diverting crude oil meant for domestic use is a breach of Nigerian law. The letter also reiterated the necessity of adhering to the Domestic Crude Supply Obligation (DCSO) policy, which ensures that crude oil allocated for refining remains within Nigeria’s borders.
During a recent industry meeting with more than 50 key stakeholders, refiners and producers expressed differing views on the implementation of the DCSO policy. Refiners criticized producers for failing to meet their supply commitments, accusing them of selling crude on the international market instead of fulfilling domestic needs. This shortage has pushed refiners to source alternative feedstocks to meet their production requirements.
On the other hand, producers argued that refiners often fall short of commercial and operational requirements, leaving producers with no option but to explore international markets to avoid disrupting their operations. Despite the ongoing disagreements between these two sectors, both sides agreed on the need for stricter regulatory oversight and improved accountability to prevent further discrepancies in crude oil allocations.
To address these issues, the NUPRC has issued a stern warning to all involved parties, urging refiners to adopt international best practices in procurement and operational efficiency. Producers have been reminded that any deviation from the DCSO policy must be approved directly by the NUPRC. This is in line with the regulations outlined in Section 109 of the Petroleum Industry Act (PIA) 2021, which ensures that a consistent and stable supply of crude oil is guaranteed to domestic refineries, thus protecting Nigeria’s energy security.
The NUPRC has committed to taking all necessary regulatory actions to enforce compliance and prevent any future violations of these directives. This includes implementing a series of measures to ensure strict adherence to the revised policies, such as the signing of the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023 and introducing a procedural framework for its enforcement.
Additionally, sources reveal that this new directive aligns with the Nigerian government’s Naira-for-Crude initiative, which aims to facilitate the supply of crude oil to domestic refineries in naira, while refined products are to be sold in the local currency. The initiative is expected to strengthen the value of the naira while improving the efficiency of the domestic fuel supply chain and reducing dependence on imported fuel.