Nigeria’s push to strengthen its domestic refining capacity has hit a major roadblock, as fresh data from the Nigerian Upstream Petroleum Regulatory Commission reveals that pricing disputes sharply limited crude oil deliveries to local refineries in the first quarter of 2026.
Despite significant allocations and even higher volumes offered by producers, less than half of the expected crude supply actually reached domestic refiners, exposing deep structural and commercial tensions within the country’s oil sector.
According to the regulator, 61.9 million barrels of crude oil were allocated to local refineries between January and March under the Domestic Crude Supply Obligation framework. Producers went a step further, offering about 68.7 million barrels during the same period. However, actual deliveries stood at just 28.5 million barrels, translating to a supply rate of roughly 36 to 46 percent of allocated volumes.
At the heart of the shortfall lies a persistent pricing dispute between oil producers and domestic refiners. The NUPRC noted that transactions are governed by a “willing buyer, willing seller” principle, meaning that even when crude is allocated and offered, deals only proceed if both parties agree on commercial terms.
This pricing mismatch has created a bottleneck in Nigeria’s domestic crude supply chain. Producers, often linked to international markets, tend to price crude based on global benchmarks such as Brent, frequently at a premium. Local refiners, on the other hand, argue that such pricing structures make domestic crude less competitive compared to imported alternatives, especially when factoring in operational and financial risks.
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The result is a paradox. Nigeria, one of Africa’s largest oil producers, is struggling to supply its own refineries with sufficient feedstock even as crude remains available in the system.
A closer look at monthly data highlights the scale of the problem. In January, producers offered 25.3 million barrels, exceeding the allocated 22.6 million barrels, yet only 9.2 million barrels were delivered. February saw a similar trend, with deliveries of about 9.1 million barrels against an allocation of 20.5 million barrels. March recorded a slight improvement, with 10.1 million barrels delivered out of 18.8 million allocated.
These figures underscore a consistent gap between supply potential and actual refinery intake, driven not by availability but by commercial disagreements.
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The implications for Nigeria’s refining ambitions are significant. The Domestic Crude Supply Obligation was introduced under the Petroleum Industry Act to prioritise local refining and reduce dependence on imported petroleum products. However, the latest data suggests that the policy is yet to achieve its intended impact.
For large scale projects such as the Dangote Refinery, which relies on steady crude supply to operate efficiently, the shortfall presents a major challenge. The refinery has, in several instances, turned to international markets to secure feedstock, importing crude from countries including the United States and others. This undermines the economic rationale of local refining, which is partly based on the assumption of readily available domestic crude.
Industry stakeholders argue that the current pricing framework is a key obstacle. Domestic refiners have called for a more tailored pricing mechanism that reflects Nigeria’s unique market conditions rather than strictly following international benchmarks. They contend that aligning prices more closely with local realities could encourage greater uptake of domestic crude and reduce reliance on imports.
On the other side, producers maintain that pricing must reflect global market dynamics, particularly given the costs associated with exploration, production, and transportation. For many producers, exporting crude at international prices remains more attractive than supplying local refineries at discounted rates.
This tension highlights a broader structural issue within Nigeria’s oil sector, where competing commercial interests often clash with national policy objectives.
The situation is further complicated by fluctuating production levels. Nigeria’s crude output has faced challenges due to factors such as pipeline vandalism, oil theft, and underinvestment in infrastructure. While production showed some recovery in March, overall output remains below potential, limiting the total volume available for allocation.
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Economic considerations also play a role. The total value of crude offered during the first quarter was estimated at over $5 billion, yet much of this volume was not converted into actual refinery supply. This represents not only a missed opportunity for domestic refining but also a broader inefficiency within the supply chain.
Looking ahead, the NUPRC has indicated that efforts are ongoing to refine the Domestic Crude Supply Obligation framework and improve transparency and efficiency. For the second quarter of 2026, 55.1 million barrels have already been allocated, with producers pledging to supply even higher volumes. However, the success of these plans will depend largely on resolving the underlying pricing disputes.
The stakes are high. Nigeria is seeking to reduce its reliance on imported fuel, stabilise domestic energy supply, and maximise the value of its oil resources. Achieving these goals will require not just increased production or allocation, but a more coordinated approach to pricing, policy enforcement, and stakeholder alignment.
For now, the first quarter data serves as a stark reminder that availability alone is not enough. Without agreement on commercial terms, even abundant resources can fail to reach the sectors that need them most.
