Inside Nigeria’s Crude Crisis

Nigeria’s oil sector is facing a dramatic struggle, and it’s not just about the price at the pump. At the heart of this crisis is a fierce battle between local oil refiners, like the Dangote Refinery, and international oil companies (IOCs).

Here’s what’s happening: The Dangote Refinery, one of Nigeria’s biggest and most ambitious oil processing facilities, says it’s not getting enough local crude oil to operate at full capacity. Despite their efforts, they’re finding it difficult to secure the oil they need from local producers. Instead, they are forced to buy the same oil from international traders at much higher prices.

Why does this matter? Well, when Dangote Refinery has to buy Nigerian oil from abroad, it’s like paying an extra fee just to get what’s supposed to be readily available. This extra cost doesn’t just hit the refinery; it can eventually affect fuel prices for everyone.

The problem is compounded by a regulatory hiccup. According to Dangote, the Nigerian Upstream Regulatory Commission (NUPRC) isn’t enforcing rules that should ensure local oil is sold to local refiners first. The commission is supposed to make sure that oil companies provide enough crude to domestic refiners before selling it to international buyers.

But here’s where things get sticky. The refinery claims that even when they turn to Nigerian oil producers directly, they are redirected to international traders or told that their crude is already committed elsewhere. This results in Dangote paying an extra $3 to $4 per barrel more than the official price, which adds up to millions of dollars in extra costs.

On the flip side, international oil companies are reportedly selling oil to Dangote through their foreign trading arms, adding another layer of cost. They also seem to prefer selling their oil to Asian markets, which means local refiners are left in the lurch.

This situation highlights a larger issue in Nigeria’s oil sector. It shows how local refiners are caught in a web of regulatory gaps and market dynamics that favor international players. It also raises questions about the country’s energy security and the need for stronger enforcement of domestic oil supply rules.

As Nigeria navigates this crisis, it’s crucial to address these regulatory and market challenges to ensure that local refiners can thrive, and ultimately, that consumers benefit from fair and stable fuel prices.