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Federal Government considers changes to crude allocation and pricing under the Domestic Crude Supply Obligation.
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Proposed direct-delivery and pricing adjustments could reduce feedstock costs for local refiners.
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Nigeria supplied 28.5 million barrels to domestic refineries in Q1, less than half the 61.9 million barrels allocated.
August 12, (THEWILL) — The Federal Government is considering changes to Nigeria’s crude allocation and pricing framework as local refiners continue to grapple with the cost and availability of feedstock, the Crude Oil Refinery-owners Association of Nigeria (CORAN) has said.
The proposed changes are expected to be discussed during a regulator-led review of the Domestic Crude Supply Obligation (DCSO), which requires crude producers to supply Nigerian refineries before exporting their output.
The review comes as the country seeks to increase domestic refining while reducing dependence on imported petroleum products.
According to a Reuters report, the proposed adjustments are designed to address some of the supply and pricing challenges affecting refiners, including the 650,000-barrel-per-day Dangote Refinery.
READ ALSO: Local Refineries Receive 53.7m Barrels Of Crude In Q2 As Supply Obligation Hits 97.4 Percent
Reducing the Cost of Crude
One of the major concerns for refiners is the cost at which locally produced crude is supplied.
Dangote Refinery has previously said Nigeria’s pricing structure adds between $3 and $4 per barrel to its feedstock costs because crude purchases are often routed through trading arms of oil producers.
CORAN spokesperson Eche Idoko said one proposal under consideration would allow a producer within an international oil company’s network to deliver crude directly to a nearby refinery, with the volumes subsequently reconciled at the terminal.
The arrangement could reduce reliance on trunkline transportation and bring crude closer to refiners, potentially lowering some logistics costs.
Another proposal would allow refiners that lift crude directly from production facilities to receive a discount reflecting freight and handling costs incorporated into Brent-linked pricing but not actually incurred by the refinery.
“This could be a win-win for both the producers and refiners”, Idoko said.
READ ALSO: Local Refineries Supply 79% of Nigeria’s Petrol in H1 as Imports Slump
Supply Shortfall Remains a Challenge
The proposed changes come against the backdrop of a significant gap between crude allocated to domestic refineries and volumes actually supplied.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said Nigeria supplied 28.5 million barrels of crude to domestic refineries during the first quarter of 2026, compared with 61.9 million barrels allocated for the period.
That means actual supply was less than half of the crude volume initially allocated to local refiners.
However, producer compliance with the domestic crude supply framework improved significantly during the period. NUPRC reported compliance of more than 90%, compared with less than 43% in the previous quarter.
The improvement suggests that while compliance with the framework has strengthened, the actual volume of crude reaching domestic refineries remains an important issue.
What the Changes Could Mean
For refiners, cheaper and more predictable access to domestic crude could improve operating economics and make it easier to plan production.
For producers, a more efficient supply mechanism could reduce logistical complications while providing a clearer framework for meeting their domestic supply obligations.
The government is also under pressure to ensure that Nigeria’s growing refining capacity translates into greater domestic fuel production. The Dangote Refinery, in particular, has increased the country’s capacity to process crude locally, making reliable feedstock supply increasingly important to the success of the domestic refining strategy.
The proposed review therefore goes beyond pricing.
It raises the broader question of whether Nigeria’s crude supply framework can efficiently connect domestic crude production with the country’s expanding refining capacity.
If the proposed adjustments reduce unnecessary costs and improve physical crude deliveries, they could strengthen the economics of local refining. But the effectiveness of the reforms will ultimately depend on whether allocated crude translates into actual and commercially viable supply for refiners.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
