Low Crude Supply Threatens Naira-for-Crude Scheme

Low Crude Supply Threatens Naira-for-Crude Scheme

The Federal Government’s **Naira-for-Crude** initiative, aimed at boosting local refining capacity by supplying crude oil to Nigerian refineries in exchange for Naira, is facing serious challenges due to inadequate crude allocations, findings by *Daily Trust* have revealed.  

President Bola Ahmed Tinubu had approved the scheme to reduce Nigeria’s dependence on foreign exchange for fuel imports, directing the sale of crude oil to the **Dangote Refinery** in Naira as part of efforts to stabilize fuel prices.  

In **October 2024**, the Federal Executive Council (FEC) approved the allocation of **450,000 barrels per day (bpd)** for domestic refining, with **Dangote Refinery** serving as the pilot project. Under the plan, the **Nigerian National Petroleum Company Limited (NNPCL)** was expected to supply **385,000 bpd** to the **650,000 bpd Dangote Refinery** in **Ibeju-Lekki, Lagos**.  

However, findings show that crude allocations to the refinery have fallen significantly below expectations, forcing **Dangote Refinery** to resort to importation.  

### **Crude Shortages Stifle Local Refining**  

Official documents reviewed by *Daily Trust* reveal that while Nigeria’s crude oil production has risen to over **1.8 million barrels per day (mbpd)**, allocations to the **Naira-for-Crude scheme** have drastically reduced.  

For **February 2025**, only **four cargoes** were allocated to the scheme, while **March** is expected to receive just **two cargoes**—amounting to a total of **1.9 million barrels for both months**. This translates to a **daily supply of just 61,290 barrels**, far below the **385,000 bpd target** set under the initiative.  

As a result, **Dangote Refinery** has been forced to **import 12 million barrels of crude oil from the United States** to sustain operations and meet domestic demand.  

Amid these supply constraints, **NNPCL and marketers** have continued to rely on imported petroleum products, spending over **₦5 trillion** on **Premium Motor Spirit (PMS)** and **diesel (AGO)** imports in the last **110 days**.  

### **Experts Warn of Economic Risks**  

A senior oil and gas expert in the public sector, who spoke on condition of anonymity, warned that the **Naira-for-Crude initiative** is at risk of being undermined. He stressed that the scheme is crucial to Nigeria’s **energy security** and efforts to **strengthen the Naira**.  

“The refineries **pay for crude at international rates but in Naira**. In turn, they sell refined products to marketers in Naira, eliminating forex risks and reducing dependence on the dollar,” he explained.  

He commended President Tinubu and the Federal Executive Council for implementing the initiative, saying its success would help **align domestic transactions with Naira payments** and reduce pressure on Nigeria’s **foreign reserves**.  

### **Massive Fuel Importation Despite Local Refining Capacity**  

Despite the presence of **Dangote Refinery, Aradel Energy, and revived government-owned refineries**, Nigeria continues to import vast quantities of petroleum products.  

According to the **Nigerian Ports Authority’s motor tanker vessels report**, between **October 1 and December 31, 2024**, Nigeria imported:  

- **2,846,499.41 metric tonnes** of **PMS (petrol)**  

- **791,619.00 metric tonnes** of **diesel (AGO)**  

Between **January 1 and 29, 2025**, an additional:  

- **342,199 metric tonnes** of PMS  

- **146,866 metric tonnes** of AGO  

This translates to over **4.27 billion liters of petrol** and **1.1 billion liters of diesel** imported in just **121 days**.  

With an average **landing cost** of **₦940 per litre for petrol** and **₦920 per litre for diesel**, Nigeria has spent over **₦4.019 trillion** on **PMS imports** and **₦1.015 trillion** on **diesel imports** during this period.  

A senior industry expert, **Dr. Ayodele Oni**, attributed the crude shortage to **forward sale agreements** that have locked NNPC into external obligations. He also cited **divestment by International Oil Companies (IOCs)** as a contributing factor, stressing the need to **increase local crude production** to sustain the scheme.  

“It is **strange** that despite having Dangote Refinery, **Aradel Energy**, and government-owned refineries back in operation, Nigeria is still importing such large volumes of fuel,” Oni noted.  

### **Dangote Refinery Absorbing Costs to Stabilize Prices**  

A source at the **Dangote Refinery**, who spoke anonymously, said the company remains committed to supplying fuel at affordable rates despite the challenges.  

“The **refinery absorbs logistics costs** to ensure **uniform pricing across Nigeria**—a role traditionally played only by the government,” he explained.  

He revealed that **major marketers**, including **MRS, Heyden, and Ardova**, have partnered with the refinery to distribute its PMS at a uniform price nationwide.  

The **Petroleum Products Retail Outlet Owners Association** has also signed an agreement with **Dangote Refinery** to ensure widespread distribution of its products at competitive rates.  

Meanwhile, efforts to get comments from **NNPCL’s Chief Spokesperson, Mr. Olufemi Soneye**, were unsuccessful, as calls and text messages to him were not responded to at the time of filing this report.  

**Conclusion

As crude shortages persist, the **Naira-for-Crude scheme** faces growing uncertainty, raising concerns about Nigeria’s ability to achieve energy security and reduce reliance on fuel imports.  

The success of the initiative depends on the government’s ability to prioritize local refiners in crude allocations** and implement policies that ensure a steady and reliable domestic supply.