NNPCL Plans to Cut Crude Supply to Dangote Refinery Amid Naira-for-Crude Adjustments

The Nigerian National Petroleum Company Limited (NNPCL) is preparing to reduce the crude oil supply to Dangote Petroleum Refinery, currently set at 300,000 barrels per day, unless there is a significant rise in Nigeria’s oil output. The expected reduction comes as part of broader changes under the federal government’s naira-for-crude initiative, following the recent revival of the Warri and Port Harcourt refineries.

Currently, these two refineries, managed by NNPCL, operate at a combined capacity of approximately 135,000 barrels per day. After years of neglect, they resumed operations in 2024, following a policy shift away from depending solely on fuel imports. The planned reduction in crude supply to Dangote’s refinery reflects the government’s commitment to improving the performance of all domestic refineries, ensuring a fair distribution of crude oil, and fostering competition in the downstream sector.

Sources close to the matter confirmed that the planned cuts in crude allocation are linked to efforts to guarantee an adequate supply of crude to all local refineries. Previously, about 445,000 barrels per day of crude were allocated to domestic refineries under NNPCL’s management, but this number will now be adjusted to account for the newly operational refineries.

“The adjustments are necessary to meet the needs of all refineries,” said one source familiar with the development. “With Warri now onstream and Port Harcourt ramping up, the crude supply formula will have to be revised. The government is working towards balancing the needs of all refineries to ensure fairness and enhance domestic refining capacity.”

Under the naira-for-crude agreement, which began in 2023, NNPCL agreed to sell crude to Dangote Refinery and others in local currency. As part of the pilot phase of this initiative, Dangote Refinery has been receiving 300,000 barrels per day, out of a total of 450,000 barrels allocated for local refineries. However, the successful restart of the Warri and Port Harcourt refineries, combined with new agreements for other smaller refineries, means that this allocation will be redistributed.

“If oil production doesn’t increase, the crude supply to Dangote may face cuts,” said one official. “The new refineries, such as the BUA refinery, will also require their share. The key to solving this issue lies in boosting Nigeria’s oil output, which the government is actively pursuing.”

The government had previously redirected crude allocations meant for the Warri, Kaduna, and Port Harcourt refineries to Dangote’s refinery during their shutdown. Now, with operations resuming at Warri and Port Harcourt, the crude allocation will be revised, likely reducing Dangote’s share, possibly to as low as 250,000 barrels per day. However, the exact distribution formula is still being finalized.

Additionally, the government has moved away from selling crude on credit, insisting that refiners must now pay upfront for their crude oil purchases. This change, though unpopular with some refiners, is part of efforts to improve revenue collection.

The Crude Oil Refinery Owners Association of Nigeria (CORAN) expressed concerns that the revived refineries should not lead to cuts in allocations to local refineries. Eche Idoko, the association’s Publicity Secretary, emphasized that the naira-for-crude agreement was meant to address exchange rate volatility, not solely to adjust crude distribution among refineries.

“The government’s primary aim with the naira-for-crude initiative was to cushion the impact of foreign exchange volatility. The reopening of refineries, including Warri and Port Harcourt, is intended to help reduce petrol prices for Nigerians, not necessarily to reduce allocations,” said Idoko. He further stressed the need for the upstream segment to ramp up production to meet growing demand.

In the meantime, NNPCL is navigating financial challenges and is expected to raise $2 billion through syndicated crude oil-backed loans. These funds will support the company’s operations and further investments in oil infrastructure, with the aim of increasing Nigeria’s crude oil production capacity to meet both domestic and international demands.

In the coming months, as Nigeria ramps up oil output, local refineries are expected to receive a steady supply of crude, allowing for optimal capacity utilization and contributing to Nigeria’s energy security.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has already forecasted a crude oil requirement of 770,500 barrels per day for local refineries in the first half of 2025, with the Dangote Refinery alone requiring 550,000 barrels per day. NUPRC’s projections emphasize the importance of boosting production to meet these growing needs.

Despite these challenges, the Nigerian oil industry is on a path toward greater self-reliance, with strategic initiatives aimed at strengthening domestic refining capacity and reducing the nation’s dependency on imported fuel. The successful integration of these refineries will play a pivotal role in achieving long-term sustainability for Nigeria’s petroleum sector.