Nigeria is yet to produce enough available crude oil to meet the Dangote Petroleum Refinery’s daily requirement of 700,000 barrels, Minister of Finance Taiwo Oyedele has said.
Oyedele made this known on Friday during an appearance on Channels Television’s Politics Today, where he explained the challenges limiting the Federal Government’s ability to supply the refinery with the volume of crude it requires.
He dismissed suggestions that the government could supply crude to the refinery at discounted rates based on production costs, insisting that the country currently lacks sufficient available volumes to meet its needs.
“But we are still not at the point where we can give Dangote 700,000 barrels. So the people that are saying we’ll discount it, we’ll do the cost of production, they don’t know what they’re talking about. We don’t have enough to service Dangote,” Oyedele said.
The minister also explained that even if Nigeria could supply the refinery with 700,000 barrels daily, the country’s crude grade would not fully meet its processing requirements.
“I need to say that even if we have 700,000 barrels today to give Dangote — the Nigerian crude is the sweet crude — it would not be the most optimal input for Dangote. Dangote needs to still import some heavy crude.
“So I don’t want to go into the technicalities, but the reality is that today we do not have up to 700,000 free crude to give anyone, including Dangote.”
Oyedele attributed the introduction of the naira-for-crude arrangement by President Bola Tinubu to the need to stabilise the domestic petroleum market amid the country’s limited crude supply.
He said the policy had helped achieve some stability, although production levels and the volume of crude available for allocation remained insufficient to meet the full requirements of domestic refiners.
The minister expressed optimism that increased production and the release of additional crude volumes would eventually enable the Dangote refinery and other local refiners to obtain sufficient supplies.
“And it has worked, but we don’t have enough quantity to give as of yet. As we ramp up production and we free up some barrels, we’ll get to a point where we’ll be able to give Dangote everything he wants and other refiners will be able to get enough,” the minister said.
He added that Nigeria’s long-term ambition should be to process all the crude oil it produces locally and export only refined petroleum products.
Oyedele also explained that the country’s total daily crude oil production does not represent the volume available for the Federal Government to allocate to local refineries.
Furthermore, Oyedele explained the forward sale arrangements, saying “if you do 1.8 million barrels per day, that does not belong to Nigeria alone”.
According to him, production-sharing contracts and joint ventures require crude oil to be distributed among the participating parties based on agreed terms, with allocations varying according to the contractual arrangements.
He explained that some of the crude produced is allocated to recover production expenses, commonly referred to as cost oil, while another portion goes towards royalties before the remaining profit oil is shared among the parties.
The minister said Nigeria’s share of crude had been significantly depleted by the financial burden of petrol subsidy payments.
He disclosed that before Tinubu introduced his economic reforms, the Nigerian National Petroleum Company Limited, which manages the country’s crude oil interests, had less than 100,000 barrels of uncommitted crude available.
According to Oyedele, the government resorted to printing money after exhausting its revenues, but the funds generated were still inadequate to meet its financial obligations.
He said the government subsequently began using proceeds from future crude oil production to secure borrowing to finance present-day consumption, particularly petrol subsidies.
Oyedele described the practice as a potentially serious financial problem, warning of the risks associated with committing future oil revenues to meet immediate spending needs.
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