Can Nigeria meet local crude demand?

In a recent turn of events, the Dangote refinery has resumed importing crude oil from the United States, raising questions about its existing deal with the Nigerian National Petroleum Corporation Limited (NNPCL) to purchase local oil. Despite a supposed agreement for up to 400,000 barrels of crude daily in exchange for Naira, the refinery seems to be exploring other sources to meet its demand. To shed light on these developments, Ayodele Oni, Partner at Bloomfield Law Practice, offered valuable insights in a CNBC Africa interview. According to Oni, the domestic supply arrangement only covers a portion of the refinery's needs, leaving room for sourcing from alternative markets. The lack of exclusivity in the deal and pre-existing contractual obligations also make it challenging for the NNPCL to meet the full demand of the refinery. With forward sales agreements and cash swaps complicating the situation, the NNPC's ability to supply the required crude remains uncertain. Amidst these complexities, the introduction of the Utapate crude oil blend adds another layer to Nigeria's crude oil market. Characterized by low sulfur content similar to the popular Bonny Light, the new blend holds promise for ramping up production but also raises concerns about market saturation and price fluctuations. While the NNPC aims to double production volumes, achieving the projected 2 million barrels per day target may prove ambitious. The impact of these developments extends to petrol supply, pricing dynamics, and distribution in Nigeria. With Dangote's entry into the market potentially improving data accuracy on consumption patterns, the industry is experiencing a gradual transformation. Despite challenges in transportation logistics, innovations like multi-modal haulage are easing the strain on infrastructure. As Nigeria navigates its crude oil landscape, stakeholders must carefully balance demand, supply, pricing, and distribution dynamics to ensure sustainable growth and stability.