Government targets domestic refining of the country’s crude output as Dangote Refinery scales up, but supply shortages and pricing disputes remain a major hurdle…..
Nigeria is stepping up efforts to ensure that a larger share of its crude oil is refined within the country, as the Federal Government seeks to reduce its long-standing dependence on exporting crude and importing refined petroleum products.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) said the government’s long-term objective is to have Nigeria’s crude production processed locally as refining capacity increases.
According to a report by S&P Global, Nigeria produced about 1.74 million barrels of crude oil per day in June 2026 and is targeting production of 3 million barrels per day by 2030.
For decades, Nigeria has exported much of its crude to refiners in Europe and Asia while relying heavily on imported petroleum products to meet domestic demand. The government now wants to reverse that pattern by strengthening local refining and ensuring that domestic refineries have access to sufficient crude.
The NMDPRA said Nigeria currently has approximately 1.12 million barrels per day of refining capacity.
The authority is also working with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to enforce provisions of the Petroleum Industry Act (PIA) requiring crude producers to make supplies available to domestic refineries.
The Dangote refinery is expected to play a major role in Nigeria’s attempt to expand domestic refining.
Rabiu Umar, chief executive officer of the NMDPRA, said the refinery is already contributing significantly to the country’s refining capacity and has plans to increase its processing capacity to 1.4 million barrels per day.
However, securing enough crude has remained one of the major challenges confronting local refineries.
Umar said the regulator is working to address crude supply constraints and ensure that producers comply with the Domestic Crude Supply Obligation (DCSO) established under the PIA.
“The Federal Government wishes to end the pattern where much of the country’s crude [volumes] are exported and refined products imported,” Umar said.
He added that the government wants to ensure that the crude produced in Nigeria is increasingly processed domestically.
“We are engaging the Nigerian Upstream Petroleum Regulatory Commission to ensure that every molecule of our 3 million b/d that we hope to achieve in the coming years is refined locally,” Umar said.
Recent figures from the NUPRC highlight the growing importance of Dangote in Nigeria’s domestic crude-refining system.
Data released by the upstream regulator on August 10 showed that domestic refineries received 53.7 million barrels of Nigerian crude in the second quarter of 2026.
The Dangote refinery accounted for the overwhelming majority of that volume, receiving approximately 52.6 million barrels.
Despite this, the refinery was offered considerably more crude during the period.
According to the NUPRC, Dangote was offered about 68.1 million barrels, a volume that would have been sufficient to meet its crude requirements.
The gap between crude offered and crude actually delivered underscores one of the major problems facing Nigeria’s refining ambitions: ensuring that crude supplies reach domestic refineries consistently and under commercially acceptable terms.
The Dangote refinery has previously identified the availability of reliable crude supplies as a significant challenge, prompting the facility to source crude from international markets to support its operations.
S&P Global reported that the Nigerian National Petroleum Company (NNPC) was initially expected to provide much of the refinery’s crude requirements. However, its ability to do so was affected by forward-selling arrangements following the refinery’s launch in 2024.
The Petroleum Industry Act, which came into effect in 2021, provides the NUPRC with powers to impose domestic crude supply obligations on upstream operators and licensees.
Under the framework, producers can be required to allocate a specified portion of their crude and condensate production for sale to domestic refineries.
A spokesperson for the NUPRC said discussions are ongoing with government agencies and crude suppliers over enforcement of the provision.
“We have been holding meetings involving the NMDPRA, Ministry of Finance, and crude suppliers on the enforcement of this provision of the law,” the spokesperson told Platts, S&P Global Energy’s pricing and news service.
The difficulty is not simply about how much crude producers are willing to offer. The price at which the crude is sold has also emerged as a sticking point.
In May, the NUPRC disclosed that upstream producers had offered 68.7 million barrels of crude to domestic refiners in the first quarter of 2026.
Actual deliveries, however, were less than half of the amount offered.
The commission attributed the difference partly to pricing disagreements between crude producers and domestic refiners.
The issue could become increasingly important as Nigeria seeks to raise both crude production and refining capacity.
If the country succeeds in reaching its target of 3 million barrels per day by 2030, the availability of sufficient refining capacity and reliable domestic crude supply arrangements will be critical to ensuring that the additional production is processed within Nigeria.
For the government, the ambition goes beyond simply increasing refinery output. It represents an attempt to reshape Nigeria’s oil industry by keeping more value from its crude within the country, reducing dependence on imported refined products and strengthening domestic energy security.
