Federal Government Urged To Address Challenges Facing Local Refineries

The federal government has been urged to urgently address the challenges confronting Nigeria’s domestic refining industry to create a predictable environment for investment and strengthen the country’s energy security.

The Crude Oil Refinery Owners Association of Nigeria (CORAN) made the call in a position paper signed by its Chairman, Engr. Momoh Jimah Oyarekhua.

The association urged the government to convene a Presidential Refining Industry Roundtable involving key stakeholders in the oil and gas sector.

According to CORAN, domestic refiners continue to face significant challenges, including foreign exchange pressures, high borrowing costs, limited access to long-term financing, difficulties in securing crude feedstock and inadequate infrastructure.

“Despite being a major crude oil producer, Nigeria continues to face challenges in supplying domestic refineries with Nigerian crude on commercially workable terms,” the association said.

CORAN acknowledged improvements in crude supply during the second quarter of 2026, but said physical allocation alone was insufficient to sustain local refining.

“Physical allocation alone is not enough. The pricing and supply arrangements must also account for transportation, quality, evacuation, financing and proximity to producing assets,” it stated.

The association called for the Federal Government’s Naira-for-Crude initiative to be institutionalised and made predictable for qualified domestic refineries, including modular and emerging operators.

It also urged the government to establish a transparent mechanism that would enable eligible domestic refineries to access Nigerian crude and settle qualifying transactions in naira, particularly as most locally refined petroleum products are sold in the domestic currency.

CORAN further called for a domestic crude-pricing framework that reflects the actual circumstances of transactions, arguing that international benchmarks should not be applied mechanically where refiners bear additional domestic transportation, trucking, barging or pipeline costs.

“International benchmarks remain useful reference points, but they should not be applied mechanically where domestic refiners also bear significant transportation, evacuation and other costs,” the association said.

It proposed that factors such as crude quality, delivery point, avoided international freight and insurance costs, domestic evacuation expenses, proximity to producing fields and reasonable producer margins should be considered in determining crude prices for local refiners.

The association also expressed concern over the resurgence of petroleum product imports, warning that excessive reliance on imported products could weaken investment in domestic refining, increase pressure on foreign exchange and expose the country to international freight and geopolitical disruptions.

“Imports may be necessary to cover temporary supply gaps, but they should not become the default solution at the expense of domestic refining capacity,” CORAN warned.

On financing, the association proposed the establishment of a Refinery Development and Expansion Financing Framework involving development finance institutions, commercial banks, pension funds, infrastructure funds and private investors.

According to CORAN, such a framework could provide long-term financing, guarantees, refinancing arrangements and structured funding to support the construction of new refineries and expansion of existing facilities.

The association also urged the government to invest in infrastructure critical to the refining industry, including pipelines, storage terminals, depots, rail-linked transportation systems and marine evacuation facilities.

“Road transportation adds substantial costs to refinery operations, while also increasing pressure on roads and exposing the country to accident risks,” it stated.

CORAN maintained that refineries should be treated as strategic industrial infrastructure capable of generating employment and stimulating activities across engineering, fabrication, transportation, petrochemicals, lubricants, plastics and construction.

It proposed the development of an integrated refining ecosystem comprising large, medium-sized and modular refineries located close to crude-producing areas and major consumption centres.

The association said the proposed Presidential Roundtable should bring together CORAN, the Nigerian Upstream Regulatory Commission (NUPRC), the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), NNPC Limited, crude producers, financial institutions, infrastructure investors and relevant government ministries.

According to CORAN, the meeting should produce clear timelines for implementing the Naira-for-Crude policy, developing a domestic crude-pricing framework, strengthening the Domestic Crude Supply Obligation, reviewing crude swaps and reducing dependence on petroleum product imports.

It also called for measures to improve access to long-term financing, develop shared infrastructure, establish strategic product reserves and support refinery expansion as part of a comprehensive national refining roadmap.

CORAN said the objective should be to move Nigeria from an import-dependent petroleum economy to a production-driven system in which Nigerian crude supplies Nigerian refineries, while positioning the country to become a major refining hub for Africa.

“Nigeria’s crude should power Nigerian refineries, support domestic supply and create the foundation for the country to emerge as a refining hub for Africa,” the association said.