Crude oil shortage threatens domestic fuel production – CEO of Dangote refinery

Dangote refinery managing director David Bird has expressed concern over a substantial shortfall in crude oil allocations under the federal government’s Crude-for-Naira initiative, highlighting operational challenges and potential implications for domestic fuel supply.

During an interview on Arise Television on Wednesday, Bird revealed that the refinery currently receives only five loads per month, significantly below the targeted 13 to 15 loads needed to operate at full capacity.

Bird cleared up widespread misconceptions about the program, stressing that it is not a subsidy or discounted crude supply plan. Rather, the initiative was designed to reduce exchange rate pressures while supporting domestic refining.

“Yes, we have been very explicit that there is an existing arrangement under the Crude-for-Naira programme, commonly misunderstood as a pricing regime. It is not. Its price is equal to the international benchmark crude oil price,” Bird explained.

He stressed that the refinery pays all costs in commercial terms, including reference prices, transportation, insurance and logistics, countering narratives of preferential treatment or subsidies.

Bird also highlighted the challenges that arise from misalignment of crude oil volume and quality, noting that misaligned allocations impact operational efficiency.

“We don’t get the full allocation, and very often we don’t get the grades that we highlight as our preferences. Right now, we’re paying more than $18 a barrel for those same grades of Nigerian crude,” he said, warning of lost value for international traders.

Under the Crude-for-Naira programme, the refinery expects 13 to 15 cargoes per month to operate efficiently. Receiving only five loads represents a significant underperformance, limiting domestic fuel production and potentially impacting energy security.

The refinery currently sources approximately 30-40% of its crude oil internationally, demonstrating flexibility as a commercial refinery. However, Bird stressed that a consistent allocation of Nigerian crude oil is essential to optimize production and achieve program targets.

Energy analysts say the crude allocation shortage could affect domestic fuel supply and undermine investor confidence in Nigeria’s refining sector.

Oil market strategist Ayodeji Ebo noted: “The Crude-for-Naira program has good intentions, but without a transparent and predictable allocation methodology, operational inefficiencies and supply disruptions are inevitable. Regulators must ensure alignment between policy and execution.”

Meanwhile, financial analyst Kalu Aja warned that misallocation could lead to unnecessary costs.

“Paying premiums for crude that matches national quality represents a loss of value that could have been retained locally. Government and operators must work closely together to maximize efficiency and ensure fuel safety,” he said.

The Crude-for-Naira programme, launched to facilitate domestic oil transactions in naira rather than dollars, aims to ease exchange rate pressures and support domestic refining growth.