Domestic Refineries Receive Less Than Half of Allocated Crude in Q1

Nigeria’s domestic refineries received 28.5 million barrels of crude oil in the first quarter of 2026, significantly below the 61.9 million barrels allocated for the period, according to data released by the Nigerian Upstream Petroleum Regulatory Commission.

The Commission disclosed that while 61.9 million barrels were earmarked for local refining under the Domestic Crude Supply Obligation framework, oil producers collectively offered a higher volume of 68.7 million barrels during the quarter. However, actual deliveries to domestic refineries fell short, with supply levels translating to between 36 and 46 per cent of available crude.

“However, actual supply to local refineries was 28.5 million barrels, translating to a supply conversion rate of 36–46 per cent as of the end of the first quarter (Q1) 2026,” the Commission stated.

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The Domestic Crude Supply Obligation, established under the Petroleum Industry Act 2021, mandates oil producers to prioritise crude supply to local refineries to reduce reliance on imported petroleum products and strengthen domestic refining capacity.

Despite the regulatory framework, persistent pricing disagreements between producers and refiners continue to hinder effective implementation. The Commission attributed the shortfall primarily to disputes arising from the “willing buyer, willing seller” market structure guiding transactions between both parties.

A breakdown of monthly figures highlights the extent of the gap between allocations, offers, and actual deliveries.

In January, 22.6 million barrels were allocated to domestic refineries, while producers offered 25.3 million barrels. However, only 9.2 million barrels were delivered within the month.

February recorded a slight dip in both offers and deliveries. While allocation stood at 20.5 million barrels, producers offered 19.8 million barrels, marginally below the target. Actual supply declined to 9.1 million barrels.

In March, deliveries improved slightly to 10.1 million barrels. This was against an allocation of 18.8 million barrels and offers of 23.6 million barrels, indicating a surplus in available crude but continued underperformance in supply to local refiners.

The data underscores a persistent disconnect between supply commitments and actual deliveries, despite producers demonstrating capacity and willingness to supply above allocated volumes in certain months.

For the second quarter of 2026, the Commission disclosed that 55.1 million barrels have been allocated for domestic refining, while producers have pledged to supply 58.8 million barrels. The outlook suggests a continued surplus in offers relative to allocations, although actual delivery levels remain uncertain.

Industry stakeholders have raised concerns that unresolved pricing mechanisms could continue to undermine the objectives of the Domestic Crude Supply Obligation. The framework was introduced to ensure consistent feedstock supply to domestic refineries, particularly as Nigeria seeks to scale up local refining capacity and reduce exposure to volatile international fuel markets.

The Commission reiterated that transactions between producers and refiners are governed by market dynamics, with both parties expected to agree on commercially viable pricing terms. However, recurring disagreements have limited the effectiveness of the policy, resulting in lower-than-expected utilisation of allocated crude volumes.

The development comes amid broader efforts to stabilise Nigeria’s downstream petroleum sector and improve energy security through increased domestic refining. Analysts note that resolving pricing disputes will be critical to achieving these objectives, as supply inefficiencies continue to constrain refinery operations.

The Commission did not indicate any immediate regulatory intervention to address the pricing challenges but emphasised the importance of adherence to the existing framework to improve supply outcomes in subsequent quarters.

With domestic refining capacity expected to expand in the near term, stakeholders have called for clearer pricing benchmarks and improved coordination between producers and refiners to ensure optimal utilisation of available crude oil resources.