The Federal Government has prohibited the export of crude oil intended for domestic refineries in a clear attempt to increase local refining capacity and lessen dependency on imported petroleum products.
It was recognized that this action also aims to reduce the strain on foreign exchange reserves.
In an effort to profit from foreign exchange gains, traders and producers have been diverting an estimated 500,000 barrels per day (bpd) of crude oil intended for local processing to foreign markets for years.
The government, acting through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has now issued a warning that export permits will no longer be granted for crude oil cargoes designated for domestic refining.
The commission further underlined that its Chief Executive must directly approve any modifications to these allocations.
The Government Takes Action Against Diversions
In a February 2, 2025, letter to exploration and production firms and their equity partners, NUPRC Chief Executive Engr. Gbenga Komolafe emphasized that it is illegal to divert crude oil meant for domestic use.
At a recent industry meeting with more than 50 major participants, producers and refiners criticized one another for inconsistent application of the Domestic Crude Supply Obligation (DCSO) policy.
Producers were accused by refiners of not fulfilling supply agreements and instead selling crude on the global market, which compelled them to look for other feedstock sources.
However, manufacturers contended that refiners frequently fall short of operational and commercial standards, forcing them to look for alternative markets in order to circumvent operational difficulties.
Both sides agreed that more regulatory enforcement was necessary in spite of these disagreements.
Strengthened Regulatory Measures
The NUPRC has urged refiners to adhere to global best practices in operations and procurement in order to prevent future violations.
Additionally, producers were reminded that they need the regulating body’s express consent before changing the terms outlined in the DCSO regulation.
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Komolafe cited Section 109 of the Petroleum Industry Act (PIA) 2021, emphasizing that the law is intended to protect Nigeria’s energy security and provide a consistent supply of crude oil to domestic refineries.
He reaffirmed that the commission would take the required regulatory action against defaulters and firmly enforce compliance.
The NUPRC has implemented a number of measures to guarantee compliance, such as signing the “Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023” and creating a framework for its implementation.
Enhancing the Naira-for-Crude Program
According to Vanguard, sources say that this latest action corresponds with the government’s ‘Naira-for-Crude’ strategy, which assures that domestic refineries get crude oil in naira and sell refined products in the local currency.
This move is designed to enhance the value of the naira while guaranteeing that Nigeria satisfies its domestic gasoline demand more effectively.
