The persistent unavailability of crude oil is severely hampering investments in Nigeria’s refining sector, delaying the full operationalization of seven new and existing refineries and undermining efforts to boost local production of petroleum products, industry stakeholders revealed on Thursday.
Refinery owners and operators warned that without a stable and guaranteed crude oil supply, Nigeria’s ambitious plans to attract investments, expand domestic refining capacity, and reduce reliance on costly fuel imports may remain unrealized.
Refinery Capacity Underutilized Despite Licensing Boom
According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), 15 operators currently hold licenses to construct refineries with a combined refining capacity of 1,151,500 barrels per day (bpd). However, only 852,000 bpd of this capacity is operational, leaving a significant portion of the country’s refining potential untapped.
A deeper analysis reveals that:
- Five licensed refineries have yet to commence operations.
- Three facilities designated by NUPRC for daily crude allocations remain inactive.
- The 10,000 bpd OPAC refinery is non-operational due to feedstock shortages.
- The 2,500 bpd Duport refinery is idle.
- The state-owned Kaduna refinery, despite receiving approvals, remains offline.
These licenses, granted to private investors in the midstream sector, were intended to bolster Nigeria’s refining capacity and curb dependence on imported petroleum products. However, operational challenges—particularly crude oil shortages—have stifled progress.
Crude Supply Crisis: A Major Bottleneck
Eche Idoko, National Publicity Secretary of the Crude Oil Refinery-owners Association of Nigeria (CORAN), confirmed in an exclusive interview that feedstock insecurity is the most pressing issue.
“The major challenge investors face is securing feedstock guarantees to reach the Final Investment Decision (FID) stage," Idoko explained. “Without a reliable crude supply, financiers are reluctant to commit, and existing refineries struggle to operate at full capacity.”
The situation has been exacerbated by Nigeria’s failure to meet its OPEC production quota, further tightening crude availability. Recent developments, such as the Dangote refinery’s suspension of naira-denominated fuel sales, highlight the strain. Industry insiders attribute this to the Nigerian National Petroleum Company Limited (NNPCL) diverting crude to foreign creditors, leaving local refiners in a precarious position.
Beyond Crude: Multifaceted Challenges Plaguing Refineries
While crude shortages remain the primary obstacle, other critical issues include:
- Funding Gaps – High capital requirements and limited financing options deter investors.
- Technical & Logistical Hurdles – Aging infrastructure, maintenance delays, and operational inefficiencies hinder performance.
- Policy & Regulatory Uncertainty – Fluctuating government policies create an unstable investment climate.
- Security Risks – Oil theft, pipeline vandalism, and community unrest disrupt supply chains.
- Deregulation Concerns – Without price guarantees, refiners struggle to ensure profitability.
Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), emphasized that many licensed refineries are located in non-oil-producing regions, complicating crude logistics.
“Some nearby wells are moribund, making feedstock access cumbersome,” Ukadike noted. “The government must address energy security, investor returns, and community relations to revive the sector.”
Calls for Government Intervention
Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), blamed technical incompetence among operators for refinery failures. Meanwhile, oil and gas expert Olatide Jeremiah urged the government to prioritize local crude allocation and ramp up production to 2.5 million bpd to stabilize the sector.
“NNPCL’s preference for foreign crude buyers over domestic refiners is a misplaced priority,” Jeremiah argued. “NUPRC must act decisively to expand production and ensure local refineries get first-right access.”
The Path Forward
CORAN’s Idoko proposed a two-pronged solution:
- Feedstock Guarantees – The government must enforce crude supply agreements for local refiners.
- Dedicated Funding Portfolios – Special financing schemes should support refinery development.
Without urgent action, Nigeria’s refining sector risks stagnation, perpetuating reliance on fuel imports and undermining energy security. The ball is now in the government’s court to stabilize crude supply, incentivize investments, and create an enabling environment for refineries to thrive.
As global energy dynamics shift, Nigeria must leverage its vast crude reserves to build a self-sufficient refining industry. The alternative—continued import dependency—will only deepen economic vulnerabilities and stifle long-term growth.