NUPRC Fights Oil Diversion, Bans Export of Domestic Supply

In an effort to increase domestic refinery capacity and decrease dependency on imported petroleum products, the Federal Government has prohibited the export of crude oil intended for domestic refineries.
It was understood that the goal of this step is to relieve pressure on foreign exchange reserves as well.
For years, dealers and producers have sought to profit from foreign exchange gains by diverting an estimated 500,000 barrels per day (bpd) of crude oil intended for local processing to foreign markets.

Now, the government has issued a warning through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) that export permits will no longer be granted for crude oil cargoes designated for local refining.
Additionally, the commission stressed that its Chief Executive must directly approve any modifications to these allocations.

The Government Takes Diversionary Action
On February 2, 2025, NUPRC’s Chief Executive, Engr. Gbenga Komolafe, wrote to exploration and production businesses and their equity partners, emphasizing that it is illegal to divert crude oil meant for domestic use.

Refiners and producers criticized one another for inconsistent use of the Domestic Crude Supply Obligation (DCSO) regulation at a recent industry gathering attended by more than 50 important participants.

In order to find alternate feedstock sources, refiners accused producers of not fulfilling supply agreements and instead selling oil on the global market.

However, manufacturers contended that refiners frequently fall short of operational and commercial standards, forcing them to look for alternative markets in order to circumvent operational difficulties.

Both parties recognized the necessity for more stringent regulatory enforcement in spite of these disagreements.

Tightened Regulations
The NUPRC has cautioned against additional violations and urged refiners to adhere to global best practices in operations and procurement.

It was also emphasized to producers that they need the regulatory body’s express consent before changing the terms outlined in the DCSO regulation.

Komolafe highlighted that the Petroleum Industry Act (PIA) 2021, specifically Section 109, is intended to ensure Nigeria’s energy security by providing a consistent supply of crude oil to domestic refineries.

He reaffirmed that in order to hold defaulters accountable, the commission would enforce compliance rigorously and take appropriate regulatory action.

In order to guarantee compliance, the NUPRC has implemented a number of measures, such as signing the “Production Curtailment and Domestic Crude Oil Supply Obligation Regulation 2023” and creating a framework for its implementation.

Naira-for-Crude Initiative Strengthening
Sources tell Vanguard that this most recent action is in line with the government’s “Naira-for-Crude” program, which guarantees that domestic refineries use naira to receive crude oil and use the local currency to sell refined products.

Nigeria would be able to better meet its local gasoline demand thanks to this move, which is also anticipated to strengthen the value of the naira.