The Petroleum Industry Act (PIA) 2021 was designed to transform Nigeria’s oil sector, ensuring a steady supply of crude to local refineries. Nearly four years later, this objective remains unfulfilled. Section 109 of the PIA, which outlines crude supply regulations for refineries, has struggled to function effectively. Refinery owners continue to face difficulties securing crude, putting Nigeria’s refining industry in a precarious position.
Inadequate Crude Supply for Local Refineries
The PIA introduced a “willing supplier, willing buyer” model, allowing crude oil transactions to occur without government interference. Under this system, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is responsible for ensuring oil producers prioritise local supply. However, many oil producers opt for export markets where they can fetch higher prices rather than selling to Nigerian refineries.
The Nigerian National Petroleum Company Limited (NNPCL), tasked with supplying crude during shortages, has also been unable to meet demand. The company’s reported $6 billion debt to international oil traders has weakened its ability to fulfil its obligations. As a result, local refineries, including the Dangote Refinery, struggle to secure crude. In February 2025, Aliko Dangote criticised NNPCL for failing to deliver the promised 650,000 barrels per day, forcing the refinery to import crude from the United States and Brazil.
Pricing and Payment Barriers
The PIA mandates that crude can only be sold to licensed, operational refineries at prices aligned with global market rates. Payments may be made in US dollars or Naira, but refineries must provide payment guarantees.
This pricing structure has created major challenges. With global oil prices hovering around $80 per barrel, purchasing crude has become expensive for Nigerian refineries, especially smaller modular refineries with limited financial backing.
The option to pay in Naira has also proven problematic. With the currency falling to over ₦1,600 per US dollar, refineries prefer dollar transactions to avoid exchange rate losses. This situation benefits larger refineries with foreign currency access while smaller refineries struggle to remain competitive.
Structural Issues in Nigeria’s Oil Industry
Industry analysts argue that the PIA does not address Nigeria’s deeper oil sector problems. “The Act assumes a seamless system, but in reality, oil producers focus on exports, NNPCL has financial difficulties, and refineries face high costs and low supply,” says Chinedu Okeke, an Abuja-based energy consultant.
The problem is further compounded by Nigeria’s ageing refineries. Facilities in Port Harcourt and Warri remain largely non-operational, despite ongoing rehabilitation efforts. Since the PIA only permits crude sales to active refineries, these facilities are effectively excluded, leaving the bulk of supply in the hands of the Dangote Refinery, which has only been operating at 60% capacity due to crude shortages.
The PIA’s decision to align domestic crude prices with international rates has also created friction. Although fuel subsidies were officially removed in 2023, the government continues to influence fuel pricing, preventing refineries from passing crude costs to consumers. Dangote Refinery has accused NNPCL of selling crude at inflated prices while importing cheaper fuel, undercutting locally refined products.
Possible Solutions and Future Outlook
Despite these challenges, reforms are still possible. The NUPRC has vowed to enforce stricter penalties for oil producers that fail to meet local supply obligations. The government is also negotiating with international oil companies to prioritise domestic supply, though progress has been slow.
Some experts believe that with proper enforcement, the PIA could still stabilise Nigeria’s oil sector. However, for now, the law has failed to guarantee crude supply for local refineries. As Nigeria continues to rely on fuel imports, the government, NUPRC, and NNPCL must act swiftly. Without immediate intervention, the vision of a self-sufficient refining industry risks remaining unfulfilled.
