Dangote Refinery Faces Crude Supply Challenge As FG Reveals Why Nigeria Imports Oil

The Federal Government has disclosed that Nigeria currently lacks sufficient unallocated crude oil to meet the supply requirements of the Dangote Refinery, explaining that a significant portion of the country’s production is committed to joint ventures, production-sharing agreements and other obligations.

The Minister of Finance, Taiwo Oyedele, made this known on Friday during an appearance on Channels Television, amid calls for the government to introduce a production subsidy to enable the refinery to meet local demand for petroleum products.

According to Bush Radio Academy, Oyedele argued that suggestions that the government should simply supply crude oil to the refinery at production cost do not adequately account for the realities of Nigeria’s oil sector.

He stressed that although Nigeria currently produces approximately 1.8 million barrels of crude oil daily, the entire volume is not available for the Federal Government to allocate freely.

“So the people that are saying, ‘We’ll discount it, we’ll do the cost of production,’ don’t know what they’re talking about. We don’t have enough to service Dangote. Dangote imports crude. And I just want us to establish that fact,” the minister said.

Oyedele explained that crude oil production is subject to contractual obligations involving joint-venture partners and companies operating under production-sharing agreements. These arrangements determine how the output and proceeds are distributed among the parties involved.

He added that production costs and royalty payments further reduce the quantity of crude oil ultimately available to the government after contractual entitlements have been settled.

According to the minister, these deductions mean Nigeria cannot freely allocate its entire daily production to domestic refineries, despite the country’s substantial oil output.

When asked how much crude oil was available for allocation after the various deductions, Oyedele said the country currently had fewer than 700,000 barrels of uncommitted crude oil available for any buyer, including the Dangote Refinery.

“That’s why when Mr President introduced the Naira for Crude, it was meant to help us gain some stability. And it has worked, but we don’t have enough quantity to give as of yet,” he explained.

The minister maintained that the Federal Government’s naira-for-crude initiative was introduced to support stability in the domestic petroleum market, although the available crude oil volume remains insufficient to satisfy all local refining requirements.

He expressed optimism that increased crude oil production would eventually enable Nigeria to supply the Dangote Refinery and other domestic operators with sufficient feedstock to meet their needs.

Oyedele also said he hoped the country would eventually reach a stage where all the crude oil it produces could be refined locally, allowing Nigeria to export finished petroleum products rather than predominantly exporting unrefined crude.

His remarks have renewed attention to the challenges facing Nigeria’s domestic refining sector, particularly the availability of crude oil, contractual obligations and the government’s efforts to strengthen local refining capacity.