Ziggy Ojiegbe

Refiners in Nigeria’s emerging downstream sector declined to purchase a significant portion of crude oil allocated to them in the first quarter of 2026, despite increased supply from producers, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Ad >>>

In a policy enforcement update, the commission disclosed that domestic refiners collectively turned down about 40.2 million barrels of crude oil offered under the Domestic Crude Supply Obligation (DCSO). The regulator noted that while 61.9 million barrels were formally allocated to local refineries during the quarter, producers went further to offer 68.7 million barrels. However, actual offtake stood at just 28.5 million barrels, reflecting a supply conversion rate of between 36 and 46 percent.

The NUPRC attributed the shortfall largely to commercial considerations, particularly pricing gaps between crude oil producers and domestic refiners. It explained that transactions within the framework operate on a “willing buyer, willing seller” basis, meaning that neither party is compelled to conclude deals if terms are not mutually beneficial. As a result, the structure of procurement and contractual agreements continues to play a decisive role in determining whether allocated volumes are eventually lifted.

The development affected both large-scale and smaller refining operators, including the Dangote Refinery, which, alongside other players in the sector, did not absorb the full volumes made available. The DCSO policy, along with the government’s “naira-for-crude” initiative, had been introduced to support the commercial viability of domestic refining and reduce dependence on imported petroleum products.

A breakdown of monthly allocations highlights the persistent gap between supply and actual uptake. In January, the commission mandated the supply of 22.6 million barrels to local refiners following consultations with industry stakeholders. Producers exceeded this requirement, offering 25.3 million barrels, but refiners lifted only 9.2 million barrels. In February, 20.5 million barrels were allocated, while producers offered slightly less at 19.8 million barrels, missing the target by 700,000 barrels. Actual deliveries declined marginally to 9.1 million barrels. By March, there was a modest improvement, with refiners taking 10.1 million barrels. During the same period, allocations stood at 18.8 million barrels, while producers offered a significantly higher 23.6 million barrels, representing an excess of 4.8 million barrels or 25.5 percent.

Despite the persistent undersubscription, the NUPRC reaffirmed its commitment to achieving the federal government’s objective of energy sufficiency. The commission stated that it would continue to leverage the framework provided by the Petroleum Industry Act, 2021, to sustain recent gains in crude oil production while refining the DCSO methodology to improve transparency and efficiency. It added that efforts would be intensified to ensure that domestic refineries receive adequate crude supply in line with regulatory commitments, even as market-driven dynamics continue to shape transaction outcomes.