Oyedele says less than 700,000 barrels of crude are freely available to the government after contractual obligations, production costs and royalties, amid renewed calls for fuel subsidies.
Nigeria’s efforts to achieve energy security and reduce dependence on imported petroleum products face a major obstacle, as the Federal Government has acknowledged that the country does not currently have enough freely available crude oil to meet the needs of the Dangote Refinery and other domestic refiners.
The Minister of Finance, Taiwo Oyedele, disclosed this on Friday, explaining that Nigeria’s daily crude oil production cannot be equated with the volume available for the government to allocate to local refineries after accounting for production-sharing agreements, joint ventures, operating costs and royalties.
Speaking on Channels Television’s Politics Today, Oyedele said Nigeria’s current crude oil output of about 1.8 million barrels per day was insufficient to guarantee the supply required by the Dangote Refinery, owned by billionaire industrialist Aliko Dangote.
“So the people that are saying, ‘We’ll discount it, we’ll do the cost of production,’ don’t know what they’re talking about. We don’t have enough to service Dangote. Dangote imports crude. And I just want us to establish that fact,” the minister said.
His remarks offer fresh insight into the supply constraints facing Nigeria’s domestic refining sector, despite the country’s position as Africa’s leading oil producer and the presence of the continent’s largest refinery.
Contractual Obligations Reduce Available Crude
Oyedele explained that Nigeria’s reported crude oil production figure does not represent oil wholly owned by the Federal Government, as a substantial proportion is allocated to companies and partners involved in exploration and production.
He said production-sharing contracts and joint-venture arrangements determine how the crude extracted from Nigerian oil fields is distributed, leaving the government with only a portion of the total output.
“Under the production sharing contract and joint venture, they share these things. And the ratios vary. Let’s say roughly 45, 55, right? You do that,” he said.
Beyond these contractual arrangements, the minister noted that crude oil producers must recover the costs incurred in extracting oil from the ground. Royalty payments and other obligations further reduce the quantity available for the government to allocate.
According to him, the combined deductions mean that the volume of crude Nigeria can freely supply to domestic refineries is significantly lower than the country’s overall production figures suggest.
“The long and short of what I’m telling you is that whatever is left for Nigeria, we have sustained it almost entirely because of fuel subsidy,” Oyedele said.
Asked how much crude oil remained available after the various deductions, the minister declined to provide a detailed breakdown but insisted that the quantity was insufficient to meet the needs of any single refinery on the scale being discussed.
“I don’t want to go into the technicalities, but the reality is that today we do not have up to 700,000 free crude to give anyone, including Dangote,” he said.
Naira-for-Crude Initiative Faces Supply Constraints
The finance minister also defended the Federal Government’s naira-for-crude initiative, describing it as a measure intended to improve stability in the domestic petroleum market by facilitating crude oil transactions in the local currency.
According to Oyedele, the policy has produced some positive results, although its effectiveness remains constrained by the limited quantity of crude available for domestic supply.
“That’s why when Mr President introduced the Naira for Crude, it was meant to help us gain some stability. And it has worked, but we don’t have enough quantity to give as of yet,” he added.
The initiative was introduced to support domestic refining and reduce pressure on foreign exchange demand by enabling eligible local refineries to purchase crude oil in naira rather than relying exclusively on dollar-denominated transactions.
However, Oyedele’s comments suggest that currency arrangements alone cannot resolve the challenges facing domestic refiners if the country is unable to provide sufficient volumes of crude oil.
He expressed optimism that increasing production would eventually allow Nigeria to meet the requirements of the Dangote Refinery and other local operators.
“As we ramp up production and we free up some barrels, we’ll get to a point where we’ll be able to give Dangote everything he wants and other refiners will be able to get enough,” he said.
The minister also outlined a broader ambition for the country’s oil and gas industry, saying Nigeria should eventually process all the crude it produces domestically and export higher-value refined petroleum products.
“I even hope personally that we get to a point in Nigeria where all the crude we produce will be refined in Nigeria and we only export refined products,” said Oyedele, a former chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.
Renewed Calls for Fuel Subsidy
The minister’s remarks come amid growing debate over the Federal Government’s decision to remove the petrol subsidy in 2023 and mounting calls for measures to cushion the impact of rising fuel prices on households and businesses.
Opposition politicians and other critics have proposed different interventions, including a production subsidy designed to support domestic refineries and improve the affordability of petroleum products.
Proponents of such a measure argue that government support for local refining could help lower production costs and reduce the burden of expensive petrol on consumers. However, Oyedele’s position highlights a fundamental question: how can the government guarantee a steady supply of affordable crude to refineries when the quantity available after contractual commitments and production costs remains limited?
The controversy intensified after Oyedele disclosed on Thursday that the Federal Government had introduced a 30-day discount on petrol sold by the Nigerian National Petroleum Company Limited (NNPCL).
The announcement drew criticism from opposition figures and members of the public, some of whom described the measure as an attempt to reintroduce fuel subsidy indirectly after the government had repeatedly defended its removal.
The debate has placed renewed attention on the distinction between temporary price relief, direct fuel subsidies and support for domestic production, with each approach carrying different implications for public finances and the petroleum market.
Economic Reforms Under Pressure
President Bola Tinubu introduced sweeping economic reforms after assuming office in 2023, including the removal of the longstanding petrol subsidy and the liberalisation of the naira’s exchange rate.
The administration has maintained that the reforms were necessary to address mounting fiscal pressures, reduce distortions in the foreign exchange market and prevent the government from continuing to finance a subsidy programme it considered unsustainable.
Tinubu has argued that retaining the subsidy would have exposed the country to a more severe economic crisis as the cost of maintaining it continued to rise.
However, the measures have also contributed to higher living costs, intensifying financial pressure on households and businesses across Africa’s most populous country. The removal of the petrol subsidy increased transport and distribution costs, while exchange-rate pressures have affected the cost of imported goods and essential inputs.
For many Nigerians, affordable petrol had long served as one of the few tangible benefits they received from the government, particularly amid persistent concerns about public services, corruption and infrastructure deficits.
The sharp increase in fuel prices has therefore become a politically sensitive issue, with the government facing pressure to demonstrate that its economic reforms will eventually translate into improved living standards.
Rising Petrol Prices Add to Consumer Burden
The pressure has been compounded by a surge in petrol prices, which the report puts at about N1,400 per litre, compared with approximately N830 before the escalation of conflict in the Middle East.
With the government largely allowing market forces to determine prices rather than imposing broad controls, the cost of petrol remains a major concern for motorists, transport operators, manufacturers and households.
Higher fuel prices have far-reaching consequences in Nigeria, where road transport accounts for a substantial share of the movement of people and goods. Increased transportation and logistics expenses can feed into food prices and the cost of other essential commodities, worsening the burden on consumers.
Against this backdrop, calls for renewed government intervention have gained momentum, even as officials continue to defend the broader direction of the administration’s reforms.
Dangote Refinery at the Centre of Nigeria’s Energy Debate
Nigeria occupies a paradoxical position in the global petroleum industry: it is Africa’s leading oil producer but has historically relied heavily on imported refined petroleum products to meet domestic demand.
The Dangote Refinery, with its large processing capacity, has been widely viewed as a major step towards reversing that dependence by increasing domestic refining and reducing the need for imported petrol and other fuels.
Yet the refinery’s operations depend on reliable access to crude oil, making supply arrangements a critical factor in determining how much of its capacity can be utilised.
Oyedele’s disclosure underscores the difference between having a large refinery and having sufficient domestically available crude to operate it consistently. It also raises broader questions about oil production performance, contractual obligations, investment in the upstream sector and the effectiveness of policies intended to prioritise domestic refining.
For Nigeria to achieve its ambition of processing more crude at home, it will need not only adequate refining infrastructure but also sustained growth in oil production and dependable arrangements for allocating crude to local operators.
The Federal Government’s stated objective remains to increase output, release more barrels for domestic use and strengthen the country’s ability to supply its own refined petroleum needs.
Until that happens, however, Nigeria’s crude supply limitations are likely to remain central to the debate over petrol prices, the future of fuel subsidies and the economic benefits expected from domestic refining.