FG Bans Export of Crude Oil Allocated to Domestic Refineries

The Federal Government has officially banned the export of crude oil designated for domestic refineries in an effort to boost local refining capacity, curb the import of refined petroleum products, and ease pressure on foreign exchange. The decision, enforced through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), aims to ensure that crude meant for domestic consumption is used accordingly.

Previously, about 500,000 barrels per day allocated for domestic refining were being diverted to the international market by producers and traders seeking quick foreign exchange gains. The NUPRC has now warned that any crude allocated for domestic refining must not be exported without express approval from the commission’s Chief Executive.

In a letter dated February 2, 2025, addressed to exploration and production companies and their equity partners, NUPRC Chief Executive Officer Engr. Gbenga Komolafe emphasized that diverting crude meant for local refineries is a violation of the country’s petroleum laws. The commission cited Section 109 of the Petroleum Industry Act (PIA) 2021, which mandates that crude oil be made available to domestic refineries to enhance Nigeria’s energy security.

A recent meeting attended by over 50 industry stakeholders, including refiners and producers, exposed disagreements over the implementation of the Domestic Crude Supply Obligation (DCSO) policy. Refiners accused producers of preferring to sell crude internationally instead of fulfilling domestic supply commitments, while producers countered that refiners often failed to meet commercial and operational terms. Despite these disputes, industry players acknowledged that the regulator has now introduced measures to enforce compliance effectively.

The NUPRC has already taken several steps to strengthen enforcement, including the introduction of the Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023 and the creation of a framework for implementation. The move is also expected to support the Naira-for-Crude programme, which requires refineries to purchase crude in naira and sell refined products to local marketers in the same currency.

According to the NUPRC, Nigeria’s domestic refineries—Dangote, Port Harcourt, Warri, Kaduna, and several modular refineries—require 770,500 barrels per day for the first half of 2025. This allocation represents 37% of the projected daily crude oil production of 2.07 million barrels. The commission assured that with increased crude oil production capacity, domestic supply obligations would be met without disrupting exports.

Meanwhile, Nigeria’s crude oil production has seen improvements, with output rising 7.38% year-on-year in December 2024 to 1.667 million barrels per day, including condensates. However, this remains below the 1.7 million barrels per day benchmark set for the 2024 budget.

Reacting to concerns about crude oil shortages for local refiners, NNPC Limited’s Chief Corporate Communications Officer, Femi Soneye, reiterated that the government remains committed to ensuring that refineries receive the necessary crude supply to boost local production and reduce dependence on imports. He emphasized that the PIA mandates oil producers to allocate a specific volume of crude to domestic refineries before exporting any excess.

Economic analysts and industry experts have welcomed the government’s decision. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), called it a positive step that could stabilize fuel prices and strengthen energy security. However, he cautioned that enforcement would require strong political will. Similarly, Prof. Wumi Iledare, a petroleum economics expert, warned that while the move is necessary, domestic crude pricing must remain competitive to avoid discouraging investments in crude oil production.

The decision comes at a time when global oil prices are fluctuating due to geopolitical and economic factors. Brent crude recently traded at $76.45 per barrel, driven by fears of supply disruptions following new U.S. tariffs on key oil-producing nations.

Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, noted that Nigeria’s crude oil output has improved due to policy reforms and increased stakeholder collaboration. He credited the progress to President Bola Ahmed Tinubu’s directive to ramp up oil production and attract foreign investment.

With the ban now in effect, all eyes will be on the NUPRC to ensure strict compliance, while the success of the policy will depend on its implementation and the ability of local refineries to efficiently process the crude allocated to them.