Nigeria faces crude supply crunch as refinery demand nears 1.5m bpd

•Refiners demand naira-for-crude overhaul, pricing reforms

Nigeria’s expanding refining industry could soon face a crude supply squeeze, with domestic refineries projected to require more than 1.5 million barrels per day (bpd) of crude against current production of about 1.68 million bpd.

The development comes amid Nigeria’s existing crude supply obligations, making it difficult for the country to meet the demands of local refiners at the moment.

Chairman of the Independent Petroleum Producers Group (IPPG), Mr. Adegbite Falade, raised the alarm at the 2026 Nigeria Oil Refining Summit in Lagos yesterday.

He warned that Nigeria cannot sustain its refining ambitions without significantly increasing crude production.

Falade said refinery demand could exceed 1.5 million bpd as existing plants raise utilisation, rehabilitation progresses and more modular refineries come on stream.

At current production levels, he said, the margin left for crude exports, government revenue, joint-venture obligations, production disruptions, OPEC commitments and other requirements would become extremely narrow.

“Geologically, yes. Technically, yes. Commercially and logistically, not yet there and certainly not by regulation alone,” Falade said on Nigeria’s ability to reliably supply its refineries.

He said the solution was to increase production, secure evacuation infrastructure, match crude grades with refinery configurations and establish a transparent, competitive and investable domestic crude market.Falade said Nigeria’s challenge was not a lack of hydrocarbon resources.

He pointed out that NUPRC’s January 2026 reserves position put crude oil and condensate reserves at 37.01 billion barrels, while gas reserves stood at 215.19 trillion cubic feet.

“The challenge, therefore, is not whether the hydrocarbons exist underground. It is whether we can convert reserves into production, production into secure supply, and secure supply into domestic refining competitiveness,” he said.

He called for greater exploration, faster field development, marginal-field growth and improved access to capital, alongside stronger security and modern crude evacuation infrastructure.

He also urged stakeholders to build a domestic crude market capable of aggregating producers’ volumes, facilitating grade blending and enabling swaps and substitutions.

“A barrel is not simply a barrel,” Falade said, stressing that refineries need the right grade, volume and quality delivered to the right location and at the right commercial terms.

He cited NUPRC data showing that compliance with the Domestic Crude Supply Obligation (DCSO) rose to 97.4 per cent in Q2 2026, from about 41 per cent in Q1.

Falade said the next step was to move from annual crude allocations to rolling supply planning, mandates to bankable contracts, opaque discounts to transparent pricing and scarcity management to production growth.

He also called for Nigeria to leverage its resources, market and geographic advantage to become a regional refining and petrochemical hub.

For his part, Chairman of the Crude Oil Refinery-Owners Association of Nigeria (CORAN), Mr. Momoh Oyarekhua, said the immediate challenge for refiners was ensuring that available crude could be accessed on commercially viable terms.

He said despite growing domestic refining capacity, some refineries still struggled to secure crude while petroleum-product imports continued.

Oyarekhua called for the full institutionalisation of Naira-for-Crude, with transparent access for qualifying domestic refineries, including modular plants.

He also demanded a domestic crude-pricing template that reflects crude quality, delivery location, avoided international logistics costs and actual domestic evacuation expenses.

CORAN wants stronger enforcement of the DCSO while allowing workable commercial arrangements between producers and refiners. It also proposed crude swaps and proximity-based supply arrangements to enable nearby producing fields to supply domestic refineries without unnecessary transportation through distant export infrastructure.

Oyarekhua called for a Refinery Development Financing Framework providing long-tenor loans, guarantees and refinancing for new plants and capacity expansion.

He also proposed shared pipelines, depots, storage terminals, jetties and rail evacuation infrastructure, alongside strategic petroleum-product reserves to cushion refinery shutdowns and international supply disruptions.

CORAN further wants regulatory and fiscal incentives for refinery expansion, particularly conversion units capable of increasing domestic supplies of petrol, aviation fuel, LPG and other products.

Oyarekhua said petroleum-product imports should progressively decline and be limited increasingly to objectively established supply gaps and strategic-stock requirements.

He urged the government to establish a clear domestic refining roadmap covering refining capacity, domestic market share, imports and eventual export capacity.

“Nigeria should not continue exporting crude, exporting jobs and importing the same petroleum products at considerable economic cost,” he said.

“Our crude must increasingly power our refineries. Our refineries must increasingly supply our market. And Nigeria must ultimately become a refining hub for Africa.”

Oyarekhua, maintained that the test is whether policy can now translate into commercially accessible crude, functioning infrastructure and sustained domestic refining.

The objective, he said, should be simple: “Refine more. Import non. Create more value. Create more jobs. Build a stronger Nigeria.”