Nigeria’s oil industry is facing mounting challenges as it struggles to find buyers for its crude exports. As of mid-March, 12 crude cargoes, due for loading in March, remain unsold, highlighting a growing weakness in the demand for Nigerian oil. The continued difficulty in securing buyers for these cargoes also extends to the upcoming April export schedule, where many more cargoes remain unsold, indicating a troubling trend for the country’s oil sector.
This sluggish demand for Nigerian crude comes at a time when the global oil market is being flooded with cheaper alternatives. These alternatives, such as Kazakh-origin light sour CPC Blend, US WTI, and Mediterranean sweet crudes, are increasingly popular in Europe, where the refinery maintenance season is about to begin. The competition from these more affordable oils has severely affected Nigeria’s crude prices, further straining the country’s ability to sell its oil. As a result, the prices of Nigeria’s April-loading crude cargoes have dropped, adding to the difficulties faced by Africa’s largest oil producer.
The oversupply of competitively priced alternatives has pushed down the value of Nigeria’s crude oil, making it less attractive to buyers. These alternative crudes, available at lower prices, have become more appealing to refineries, particularly in Europe, which is a key market for Nigerian oil. The challenge of competing with these cheaper options has made it difficult for Nigeria to maintain its share of the global oil market.
With the refinery maintenance season in Europe set to begin, demand for crude oil generally slows, exacerbating the problem for Nigerian oil producers. As European refineries conduct their routine maintenance, there is less need for crude imports, and they turn to cheaper sources, which increases the competition for Nigerian crude and drives down prices.
This situation comes at a time when Nigeria’s state-owned Nigerian National Petroleum Corporation (NNPC) is in the midst of negotiations for a potential extension of its six-month crude supply agreement with the Dangote refinery. The agreement, which ends in March 2025, has been a vital part of Nigeria’s strategy to stabilize the local currency and reduce inflation by supplying the Dangote refinery with nearly 300,000 barrels per day (bpd) of crude oil in exchange for naira payments.
The Dangote refinery, which began operations in late 2023, has become heavily reliant on NNPC for its crude oil supply. As of February 2025, the refinery has received over 84 million barrels of crude oil from NNPC, with more than 80% of these deliveries sourced domestically. This arrangement has helped stabilize Nigeria’s economy by reducing gasoline prices and curbing inflation. However, the future of this program now seems uncertain, as NNPC’s ability to continue supplying crude at discounted rates is under pressure.
NNPC’s capacity to offer these discounted rates is limited by the financial demands of maintaining its crude supply deals. The state-owned company also faces constraints in the volume of crude available for domestic refiners like Dangote, as some reports suggest that NNPC has already committed to term supply deals that extend up to 2030.
Since the beginning of the NNPC-Dangote crude supply agreement, the terms have evolved significantly. Initially, Dangote was allowed to pay in naira for the first 10 cargoes each month, with any additional cargoes priced in dollars. However, NNPC has since adjusted the terms, offering some cargoes strictly for payment in dollars while others remain available for naira payments. Any further changes to these terms could force Dangote to increase its reliance on foreign crude imports, potentially destabilizing the refinery’s operations and Nigeria’s crude oil supply system.
In fact, there are signs that Dangote may be preparing to shift away from relying solely on NNPC for its crude supply. According to refinery sources, Dangote plans to source at least half of its crude oil needs from the international market. The company is currently constructing eight new storage tanks to facilitate this transition. If Dangote shifts to more foreign crude imports, it could put additional pressure on NNPC to manage its domestic supply obligations.
NNPC is also navigating the complexities of the Domestic Crude Supply Obligation (DCSO), a system mandated by Nigeria’s Petroleum Industry Act. The DCSO, which has been enforced by the National Upstream Petroleum Regulatory Commission (NUPRC) since May 2023, requires monthly meetings between domestic refiners and upstream operators to review production and loading programs. This system is designed to ensure that local refiners like Dangote get priority access to domestic crude supplies.
Under the DCSO, NNPC must fulfill its obligation to provide crude to domestic refineries first, before exporting it abroad. However, the ongoing challenges in securing buyers for Nigerian crude, combined with the evolving terms of the NNPC-Dangote deal, have created an uncertain outlook for both domestic and international oil markets.
As the country faces weak demand for its crude oil exports and the internal dynamics of the NNPC-Dangote arrangement evolve, Nigeria’s oil sector is grappling with several complex issues. The unsold March cargoes and the continued availability of April crude cargoes reflect the difficulties Nigeria faces in maintaining a competitive edge in the global oil market.
The future of Nigeria’s oil exports may depend on the successful negotiation of the NNPC-Dangote agreement and the implementation of the DCSO. If NNPC is unable to maintain the current terms of its agreement with Dangote, or if it is forced to adjust its pricing structure, Nigeria may face challenges in sustaining its oil production and export capacity. Furthermore, Nigeria’s ability to secure buyers for its crude oil at competitive prices will play a significant role in determining the health of the sector in the coming months.
As the global oil market remains volatile and competition for crude oil supplies intensifies, Nigeria’s oil sector will need to find new strategies to cope with the changing dynamics. For now, the unsold March cargoes and the available April supply are clear indicators of the challenges Nigeria faces in this increasingly competitive market.
