Crude, other constraints limit Nigeria’s refining capacity 62% – FG

The Federal Government has disclosed that Nigeria’s refining capacity remains hampered by multiple structural and operational constraints, with crude supply shortages identified as the most significant factor limiting utilisation by as much as 62 per cent. This revelation highlights the persistent challenges undermining the nation’s long-standing ambition to achieve self-sufficiency in petroleum product refining and reduce reliance on expensive imports.

According to government officials, although Nigeria hosts several refinery assets with the potential to meet a substantial portion of domestic demand, the performance of these facilities continues to fall far below expectations. The combination of inadequate crude supply, ageing infrastructure, inconsistent maintenance cycles, insecurity in crude-bearing regions, and commercial disagreements between operators and suppliers has made it difficult for refineries to operate optimally.

The government noted that even with the gradual rehabilitation of state-owned refineries and the emergence of privately owned processing plants, Nigeria’s refining sector remains constrained by systemic issues that have built up over decades. Crude allocation challenges rank highest on the list. Officials explained that refineries often struggle to secure adequate volumes of feedstock because of production disruptions, pipeline vandalism, and the prioritisation of crude exports needed to generate foreign exchange. In many cases, plants operate below their technical capacities, not due to equipment failures but because the crude required to sustain operations is either unavailable or insufficient.

The government emphasised that the country’s inability to refine enough petroleum products has significant economic implications. Despite being one of the world’s major crude oil producers, Nigeria still imports a large share of the petrol, diesel, and aviation fuel consumed locally. This dependence on imports places heavy pressure on the foreign exchange market, contributes to domestic fuel price volatility, and exposes the economy to external shocks. Officials warned that unless recurring constraints are addressed collectively, the country will continue to face supply gaps and persistent economic strain linked to energy insecurity.

Beyond crude supply issues, refinery infrastructure remains another major barrier. Decades-old facilities at Port Harcourt, Warri, and Kaduna have suffered from prolonged breakdowns and technical obsolescence. While rehabilitation projects are underway, progress has been slow, hindered by funding constraints, procurement hurdles, and shifting timelines. Experts argue that a lack of consistent maintenance culture over the years has compounded structural deterioration, making it more expensive and time-consuming to restore full operational capacity.

Security concerns in the Niger Delta also play a central role. Attacks on pipelines, crude oil theft, illegal refineries, and disruptions in host communities continue to destabilise crude evacuation systems. As a result, even when production levels improve, transportation bottlenecks and security threats reduce the volume of crude available to refineries. The government noted that this insecurity has discouraged investments in pipeline upgrades and offshore crude transportation alternatives, further limiting feedstock supply.

Another layer of constraints involves commercial disagreements between crude suppliers and refinery operators. With oil companies prioritising export markets where prices are typically higher and payment structures more predictable, local refineries often struggle to secure supplies at competitive rates. This mismatch in pricing expectations and supply contracts contributes to frequent operational downtime for domestic processing plants.

Energy analysts say Nigeria’s private sector-led refining initiatives, including modular refineries and larger privately owned plants, were expected to provide some relief. However, many of these facilities still face difficulties accessing crude, connecting to pipelines, securing financing, or meeting regulatory requirements. As a result, only a fraction of their installed capacities is currently being utilised.

Government officials stressed that resolving these challenges requires a multi-pronged approach involving regulatory reforms, improved security measures, and strategic partnerships with industry stakeholders. The government reaffirmed its commitment to implementing the Petroleum Industry Act to create clearer processes for crude supply contracts, pricing frameworks, and investment incentives. Strengthening pipeline security, promoting local refining investments, and harmonising policies across regulatory agencies were also identified as priority steps.

Industry experts argue that the success of Nigeria’s energy transition hinges on the country’s ability to revamp its refining sector. They noted that while export earnings from crude oil remain important, domestic refining is crucial for energy stability, job creation, price moderation, and foreign exchange conservation. Achieving these outcomes, they say, requires a steady supply of crude to refineries at commercially competitive terms, improved infrastructure, and enhanced operational transparency.

As Nigeria seeks to reposition itself as a refining hub in Africa, the government acknowledged that significant work lies ahead. Despite the challenges, officials expressed confidence that planned rehabilitation efforts, coupled with increased private sector participation, could gradually restore refining capacity and reduce the current utilisation shortfall. For now, the 62 per cent constraint attributed to crude and other systemic factors underscores the depth of structural reforms needed to stabilise and revitalise Nigeria’s refining industry.