In 2024, Nigeria, along with other African nations, produced approximately 1.9 billion barrels of crude oil. Notably, over 75% of this production, equating to about 1.4 billion barrels, was exported to Europe and other continents. This substantial exportation has left local refineries underutilized, exacerbating energy poverty across the continent.
Local Refineries Struggle Amidst Export Focus
Despite being Africa’s largest oil producer, Nigeria’s domestic refining capacity remains significantly underdeveloped. The Dangote Refinery, inaugurated in May 2023 with a processing capacity of 650,000 barrels per day, was anticipated to transform the nation’s energy landscape. However, challenges in securing adequate crude supply have hindered its operations. In the first half of 2024, local refineries required 483,000 barrels per day but received only 177,777 barrels per day, highlighting a significant shortfall.
Regulatory Measures and Compliance Issues
To address these challenges, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) mandated oil producers to allocate 483,000 barrels per day to domestic refineries for the first half of 2024. The Dangote Refinery was slated to receive the largest share of 325,000 barrels per day. Despite these directives, compliance has been inconsistent, leading to tensions between regulators and oil producers.
Shift Towards Domestic Crude Utilization
In response to supply challenges, the Nigerian National Petroleum Company (NNPC) announced plans to supply 385,000 barrels of crude oil daily to the Dangote Refinery in naira, starting October 1, 2024. This initiative aims to reduce reliance on imported crude and alleviate pressure on foreign exchange reserves.
Economic Implications and Energy Poverty
The heavy reliance on crude oil exports has economic ramifications, including the loss of potential value addition and job creation associated with local refining. Furthermore, the underutilization of domestic refineries contributes to energy poverty, limiting access to affordable energy for millions of Nigerians.
