NIGERIA: The Federal Government has said Nigeria does not currently produce enough crude oil available to the country to meet the supply requirements of the Dangote Refinery and other domestic refineries, amid renewed calls for the reintroduction of fuel subsidies.
Minister of Finance, Taiwo Oyedele, disclosed this during an interview on Channels Television, explaining that although Nigeria produces about 1.8 million barrels of crude oil daily, a significant portion is committed to obligations under production-sharing contracts and joint ventures, as well as production costs and royalties.
Oyedele’s comments followed proposals by opposition figures for a production subsidy to help domestic refineries supply petroleum products at lower prices.
According to the minister, suggestions that the government should provide crude oil to local refiners at discounted rates based on production costs fail to account for the volume of crude oil that is actually available to the Nigerian government.
“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,” he said.
The minister explained that Nigeria’s crude oil output is shared among different parties under contractual arrangements, while additional volumes are deducted to cover the cost of extracting the resource and royalty payments before the remaining profit oil is shared.
He said these obligations significantly reduce the volume of crude oil available to the Federal Government for domestic allocation.
When asked how much crude oil was available to the government after the various deductions, Oyedele said Nigeria currently had less than 700,000 barrels of freely available crude oil to distribute to buyers, including the Dangote Refinery.
“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.
Oyedele added that the Federal Government’s naira-for-crude initiative was introduced to improve stability in the domestic petroleum market but acknowledged that the country still lacked sufficient volumes to meet all the requirements of local refiners.
He expressed optimism that increased crude oil production would eventually enable Nigeria to supply the Dangote Refinery and other domestic facilities with sufficient feedstock.
“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,” the minister said.
He also expressed hope that Nigeria would eventually refine all the crude oil it produces locally and export refined petroleum products rather than crude oil.
Fuel subsidy debate intensifies
Oyedele’s remarks come amid growing political and public debate over rising petrol prices and calls for the government to intervene to reduce the burden on households and businesses.
Opposition figures have proposed different measures, including production subsidies for domestic refineries, as an alternative to the previous system of subsidising the retail price of petrol.
On Thursday, Oyedele disclosed that the Federal Government had introduced a 30-day petrol discount on products dispensed by the Nigerian National Petroleum Company Limited (NNPCL).
The announcement, however, attracted criticism from opposition politicians and other Nigerians, who questioned whether the initiative amounted to a return of fuel subsidies through another channel.
President Bola Tinubu introduced major economic reforms after assuming office in May 2023, including the removal of the longstanding petrol subsidy and the adoption of a more market-driven exchange-rate system.
Although the reforms have received support from some economists, they have also contributed to increased living costs and intensified economic hardship for many Nigerians.
Before the subsidy removal, relatively low petrol prices helped reduce transportation and distribution costs, with knock-on effects on the prices of food and other essential goods. For many households, subsidised petrol represented one of the few tangible benefits they received from the government.
Tinubu has defended the reforms, arguing that the subsidy had become fiscally unsustainable and that its removal prevented a potentially deeper economic crisis.
Nigeria remains Africa’s leading oil-producing country and is home to the Dangote Refinery, owned by billionaire industrialist Aliko Dangote.
However, domestic petrol prices have risen sharply, reaching approximately ₦1,400 per litre, compared with about ₦830 before the recent escalation of tensions in the Middle East, according to the figures cited in the report.
The Federal Government’s latest position highlights a major challenge facing Nigeria’s domestic refining ambitions: increasing crude oil production and ensuring that sufficient volumes are available to local refineries while meeting existing contractual obligations and other commitments.
