The federal government has announced new regulations requiring its oil producers to sell crude oil to local refineries using the local currency, the naira, or the dollar.
The announcement was made through the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), an agency of the government mandated with regulating the petroleum upstream sector, News About Nigeria reports.
The latest move is aimed at reducing the country’s dependence on imported refined products.
With the new regulations, all oil companies in Nigeria must now sell their crude oil to local refineries that are in need of it. Only after meeting this requirement can producers export crude.
The latest model ensures that if there are issues in agreeing on crude supply, the NUPRC steps in. It helps arrange deals between local refiners and producers, using a ‘willing-buyer, willing-seller’ approach. Refiners can pay for the crude they buy in dollars, naira, or both.
The statement noted that the NUPRC plans to start the Domestic Crude Oil Supply Obligation initiative in the second half of the year. The exact amount of crude each refinery needs to buy hasn’t been decided yet.
The initiative is supported by the Petroleum Industry Act (PIA), which was passed in 2021. One part of this act mandates oil producers in Nigeria to set aside some of their crude oil for local refineries. This helps prevent shortages.
This was implemented in January, when the NUPRC instructed oil producers in the country to set aside approximately 483,000 barrels per day (bpd) for local refineries.
The Dangote refinery, with a capacity of 650,000 barrels, receives the largest share at 325,000 bpd.
Other refineries expected to benefit include the Warri and Port-Harcourt refineries, which are predicted to get 75,000 and 54,000 barrels of crude oil per day, respectively.
