The Nigerian government’s foray into bolstering domestic refining capacity while maintaining crucial foreign exchange earnings through crude oil exports reveals a complex interplay of policy decisions, market dynamics, and financial considerations. During the first four months of 2025, the government engaged in a dual strategy: supplying crude oil to the Dangote Petroleum Refinery, a key player in the domestic refining sector, while simultaneously exporting crude to international markets. This dual approach aimed to balance the need for increased local fuel production with the imperative to generate foreign currency reserves.
A closer examination of the data reveals a fluctuating pattern in crude oil supply to the Dangote Refinery. Between January and April 2025, the government sold crude oil worth N219.38 billion to the refinery, marking a substantial increase of over 538%. This surge in supply suggests a concerted effort to support the refinery’s operations. However, the refinery publicly expressed concerns about the adequacy of the crude allocation, claiming it necessitated reliance on imports from the United States to maintain production levels. This discrepancy between the government’s reported supply and the refinery’s perceived shortage raises questions about the effectiveness of the supply chain and the underlying factors influencing the refinery’s operational challenges.
Concurrent with the domestic supply, the Nigerian government continued its crude oil exports, generating N231.47 billion from international sales during the same four-month period. This near-equal split between domestic supply and export earnings underscores the government’s balancing act. While prioritizing domestic refining, it remained heavily reliant on export revenues to sustain its foreign exchange reserves. The monthly breakdown of export earnings reveals significant fluctuations, with a sharp decline in April 2025 attributed to a decrease in exported crude volume. This volatility exposes the Nigerian economy’s vulnerability to global oil price fluctuations and the inherent risks associated with dependence on a single commodity for a substantial portion of its revenue.
The Naira-for-Crude deal, a pivotal element of the government’s strategy to support domestic refining, encountered obstacles during this period. The Dangote Refinery temporarily suspended sales of petroleum products in Naira due to a mismatch between its sales proceeds, received in Naira, and its crude oil purchase obligations, priced in US dollars. This mismatch highlighted the challenges of implementing a local currency-based exchange within a globally dollar-denominated oil market. Although the Federal Executive Council subsequently ordered the full implementation of the Naira-for-Crude deal, the refinery’s continued concerns about inadequate crude supply suggest lingering operational and financial challenges.
The situation is further complicated by the dynamics of fuel pricing and affordability for Nigerian consumers. Fuel marketers urged the government to implement measures to prevent escalating petrol and diesel prices, a concern exacerbated by the rising cost of refined petroleum products from suppliers, including the Dangote Refinery. The Independent Petroleum Marketers Association of Nigeria (IPMAN) advocated for a discounted crude oil price for local refineries to ensure affordable fuel prices for citizens. This recommendation highlights the delicate balance the government must strike between supporting domestic refining and protecting consumers from the potentially negative consequences of rising fuel costs.
A detailed examination of the May 2025 Federation Account document reveals a dramatic drop in domestic crude allocations in April 2025, coinciding with a significant decline in federal revenue. This decline, coupled with the issues surrounding the Naira-for-Crude deal and the Dangote Refinery’s concerns, paints a complex picture of the challenges facing Nigeria’s oil sector. The government’s ambition to boost domestic refining while maintaining crucial export revenue streams is confronted by operational bottlenecks, currency exchange complexities, and the imperative to ensure affordable fuel prices for its citizens. This multifaceted challenge requires a comprehensive and strategic approach to ensure the long-term viability of the domestic refining sector and the overall health of the Nigerian economy.
