Nigeria Eyes Crude Swap to Make Local Refineries more Competitive

Nigeria is considering a new way of supplying crude to domestic refineries as regulators seek to address a problem that persists despite rising compliance with the country’s domestic crude supply rules: local refineries can still find imported crude more competitive than Nigerian crude.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said it has begun consultations with industry stakeholders on a domestic crude and gas swap arrangement that could reduce transportation costs and improve the availability of feedstock for local refineries.

The proposal would allow oil producers to satisfy domestic supply obligations through a swap rather than physically transporting their crude across the country.

NUPRC Chief Executive Oritsemeyiwa Eyesan disclosed the plan during a visit to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in Abuja.

She said the arrangement could make better use of existing supply and logistics networks while improving compliance with the Domestic Crude Supply Obligation (DCSO) and Domestic Gas Supply Obligation.

The supply gap is becoming a pricing problem

Nigeria’s challenge is no longer simply whether crude is being supplied to domestic refiners.

NUPRC data show that local refineries received 53.7 million barrels of crude between April and June 2026, equivalent to 97.4 per cent performance under the DCSO during the quarter.

Yet some refiners continue to import crude.

The reason, according to concerns repeatedly raised by refiners, is that Nigerian crude can sometimes be offered at prices that make imported alternatives more attractive. This means that even when domestic crude is physically available, the cost of acquiring and transporting it can undermine the economics of local refining.

That is where the proposed swap could become significant.

A producer located close to an export terminal could fulfil its domestic obligation on behalf of another producer whose crude is closer to a refinery. The two producers would then settle the equivalent volumes without requiring crude to be transported unnecessarily across the country.

The objective is to reduce logistics costs and make domestic crude supply more efficient.

Regulators face pressure to make refining capacity work

The proposed arrangement comes as Nigeria's refining landscape changes rapidly, with the Dangote Petroleum Refinery and other private facilities increasing domestic processing capacity.

That creates a new pressure for regulators: ensuring that rising refining capacity is matched by sufficient and economically viable crude feedstock.

NMDPRA Chief Executive Rabiu Abdullahi Umar acknowledged that pricing remains central to the viability of domestic refining, noting that crude transactions are governed by the willing-buyer, willing-seller principle under the Petroleum Industry Act.

The authority also backed the development of strategic petroleum reserves, which it said could strengthen energy security and support price stability.

The crude swap proposal is still at the consultation stage for NUPRC, with the detailed rules yet to be finalised.

Its significance lies in what it attempts to fix: not merely the availability of Nigerian crude, but the cost and logistics of getting that crude into Nigerian refineries on commercially viable terms.