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The recent alarm raised by the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) over the diversion of 500,000 barrels of crude oil daily, intended for local refineries, has brought to light a significant issue affecting Nigeria’s energy sector. According to PETROAN, oil-producing companies have been rerouting this crude to international markets, thereby stalling the operation of domestic refineries and exacerbating the country’s ongoing fuel supply challenges.
This diversion has, according to PETROAN’s Publicity Secretary, Joseph Obele, led to the neglect of local refineries, with a growing preference for exports driven by the allure of foreign exchange. This practice, labelled as a major racketeering scheme, prioritises short-term financial gain over the long-term benefits of local refining. The immediate consequence of this diversion is the continued reliance on imported petroleum products, which not only strains the nation’s foreign exchange reserves but also prevents Nigeria from fully utilising its refining capacity.
PETROAN’s concerns are well-founded. The Nigerian petroleum industry has long been plagued by inefficiencies in refining, and the country’s continued dependence on imported refined products has been a major impediment to economic growth and energy security. For years, Nigeria has struggled to refine its own crude, despite being one of Africa’s largest oil producers. The fact that 500,000 barrels of crude oil, allocated for domestic refining, regularly end up on the international market is a stark reminder of the systemic failures undermining the sector.
In response to this, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has taken a commendable step by banning the export of crude oil meant for local refineries. This move, while still in its early stages, could prove pivotal in reversing the trend of crude oil diversion. PETROAN has rightfully lauded the NUPRC for its intervention, recognising the potential for this policy to boost domestic refining and enhance the availability of petroleum products in Nigeria.
The NUPRC’s efforts to address the issue are timely. In a letter dated February 2, 2025, the Commission Chief Executive (CCE), Engr. Gbenga Komolafe, reiterated that the diversion of crude meant for domestic refining is a violation of the law, and the regulator has vowed to enforce strict adherence to the Domestic Crude Supply Obligation (DCSO) policy. This policy aims to ensure that crude oil allocated for domestic refining stays within the country, a measure vital for boosting the operational capacity of local refineries.
However, as highlighted by a recent meeting attended by over 50 key industry players, there are challenges in the implementation of this policy. Both refiners and producers have traded accusations, with refiners claiming that producers fail to meet supply terms, while producers argue that refiners struggle to fulfil commercial and operational terms. This ongoing blame game has hampered effective collaboration between the two parties, leading to the continued diversion of crude oil.
The NUPRC, recognising these issues, has stressed the need for both refiners and producers to abide by international best practices in procurement and operational matters. The Commission’s caution to both parties, urging them to avoid further breaches, reflects a determined effort to restore integrity to the system. Engr. Komolafe’s reference to Section 109 of the Petroleum Industry Act (PIA) 2021 underscores the legal foundation for the policy and its crucial role in securing Nigeria’s energy future.
The successful implementation of the DCSO policy is critical for the nation’s energy security. If oil-producing companies and refiners can reach a constructive agreement, Nigeria stands to benefit significantly from the increased capacity of domestic refineries. Not only would this reduce the country’s dependence on imported refined products, but it would also help stabilise local fuel prices and conserve foreign exchange.
However, it is essential that all stakeholders, from oil producers to refineries and regulatory bodies, collaborate effectively. PETROAN’s call for swift action against defaulters is a necessary step in ensuring that the new policy is fully implemented and upheld. It is equally important that the Nigerian government continues to prioritise investments in domestic refining infrastructure to enable refineries to operate efficiently and meet the country’s energy needs.
Ultimately, the diversion of crude oil intended for local refineries highlights the deeper issues of mismanagement, lack of accountability, and short-term profiteering that have plagued Nigeria’s petroleum sector for years. The NUPRC’s intervention is a positive move, but sustained action is needed to create a transparent and efficient oil industry that can support Nigeria’s growth and energy security in the long term. The country’s vast oil resources must no longer be allowed to benefit only foreign markets at the expense of its own domestic economy. The time to act is now.