MARKET NEWS

By Dare Olawin

The Lagos Chamber of Commerce and Industry has asked the Federal Government to extend the naira-for-crude deal to modular refineries instead of restricting it to the Dangote Petroleum Refinery only.

This came in the wake of complaints by the Crude Oil Refinery Owners Association of Nigeria that smaller refineries had been denied access to crude oil as producers sell to international buyers to make dollars.

Reacting to CORAN’s complaints in a chat with our correspondent, the Director-General of the LCCI, Dr Chinyere Almona, said modular refineries should not face challenges in getting feedstock.

Modular refinery operators had raised serious concerns about oil producers’ alleged refusal to sell crude locally.

According to them, upstream producers continue to prioritise sales to foreign traders in exchange for dollars. This, they argue, effectively sidelines domestic refiners, who are left without affordable or guaranteed access to crude.

CORAN alleged that many international oil companies either export crude or sell it to the global market at premium prices, leaving local refiners to scramble for expensive feedstock.

Almona said the situation significantly undermined Nigeria’s goal of achieving self-sufficiency in refining. Critics have argued that the trend exposed a dangerous enforcement gap in the Petroleum Industry Act.

Almona regretted that while the PIA introduced the Domestic Crude Supply Obligation and the Domestic Crude Refining Requirement to support local refiners, oil producers continued to operate on a ‘willing buyer, willing seller’ basis that favoured exports over local demand.

“This practice leaves modular refineries facing multiple disadvantages. First, they are unable to compete with large-scale foreign buyers who pay in dollars. Second, when they do access crude, it is often priced at international benchmarks, converted into naira, subjecting them to foreign exchange risks and extreme pricing volatility,” she noted.

Going down memory lane, the LCCI boss recalled that the Federal Government, in a strategic policy shift, launched the naira-for-crude initiative to allow Nigerian refineries to purchase crude oil in naira rather than dollars, aiming to shield them from forex shocks and reduce the country’s dependency on fuel imports.

“However, this policy encountered immediate implementation setbacks. By March 2025, the Nigerian National Petroleum Company Limited had halted the initiative after forward-selling a large portion of its crude, resulting in a temporary suspension of naira-based crude supply, even for the Dangote refinery.

“Despite this interruption, the government reaffirmed its commitment in April 2025. A ministerial committee chaired by the Finance Minister, Wale Edun confirmed that the crude-for-naira initiative would continue indefinitely, recognising its importance for energy security and local refining,” she narrated.

However, Almona stressed that the execution of the naira-for-crude has been selective, excluding modular refineries.

“In essence, while the naira-for-crude policy exists on paper and has political support, its execution is selective. Smaller, licensed modular refineries—key to regional development and employment—remain excluded from the benefits currently concentrated in the hands of a few large players.

“To strengthen the crude-for-naira policy and support Nigeria’s refining ambitions, several key actions must be taken. First, the government must enforce the Domestic Crude Supply Obligation and the Domestic Crude Refining Requirement under Section 109 of the PIA with clear volume targets and penalties for non-compliance.

“Access to naira-priced crude should be extended beyond the big refineries to include modular and other licensed refineries to ensure equity and diversification. A hybrid pricing model combining international benchmarks with local discounts and exchange buffers should be introduced to protect refiners from market volatility. Dedicated forex windows or hedging mechanisms are also essential for those still paying in dollars,” she posited.

Almona emphasised that long-term enforceable crude supply contracts would improve investment security, while stronger regulatory oversight by the NUPRC is necessary to ensure compliance and apply sanctions where needed.

The DG requested that upstream production capacity be increased, infrastructure upgraded, and oil theft curbed to guarantee consistent crude availability.

She highlighted the significance of full transparency in crude allocation, including pricing, timing, and beneficiaries, saying these were vital to building trust and preventing misuse.

In conclusion, Almona stated, “The naira-for-crude policy offers a meaningful opportunity to reset Nigeria’s downstream oil sector, but only if implemented fairly, rigorously, and transparently. Right now, the benefits are disproportionately concentrated in the hands of one mega refinery, while modular operators remain sidelined.

“To genuinely promote refining self-sufficiency, the government must ensure that all licensed refineries have access to crude under concessionary terms to promote local content, pricing and forex support mechanisms are in place to protect refiners from systemic shocks, and enforcement is consistent, with sanctions for defaulters.

“If these actions are taken, the naira-for-crude initiative can go beyond symbolism and become the cornerstone of a sustainable and inclusive refining revolution in Nigeria.”