The current pricing approach for Nigeria's crude oil is under fire—many industry insiders believe it’s causing distortions that harm local refineries’ competitiveness against imported fuels. But here’s where it gets controversial: Could the existing model be inadvertently undermining Nigeria’s efforts to develop a self-sustaining energy sector?
Recently, the Crude Oil Refiners Association of Nigeria (CORAN) voiced strong criticism about the way crude oil prices are currently set under a system known as the ‘willing buyer, willing seller’ model. This model, mandated by Nigeria’s Domestic Crude Supply Obligation (DCSO), means that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) requires oil producers to supply crude oil to domestic refineries. However, the price at which this crude is sold isn’t fixed. Instead, it’s negotiated privately between the producer (the seller) and the refinery (the buyer), based on prevailing market conditions. Essentially, both parties agree on a price, which can lead to inconsistencies and potential distortions.
This framework requires that a certain volume of oil is sold domestically, with the terms—particularly the price—being mutually determined. But critics argue that this approach doesn’t adequately reflect the true value of crude or support the growth of the local refining industry.
CORAN’s Publicity Secretary, Eche Stephen Idoko, recently called on the government to establish a more transparent and equitable pricing system for crude supplied to indigenous refineries. He emphasized the need for a model that guarantees fair margins for refiners while also ensuring crude producers get appropriate value. This suggests that the current system might favor one side over the other or lead to unfair prices.
Interestingly, the idea of fixing prices or establishing a regulated framework was rejected earlier this year by Gbenga Komolafe, CEO of NUPRC. During a February 2025 meeting with key industry groups like the Oil Producers Trade Section (OPTS) and the Independent Petroleum Producers Group (IPPG), Komolafe made it clear that the government would not adopt a price-fixing mechanism for crude oil. Instead, he stressed adherence to international best practices that support the ‘willing seller, willing buyer’ principle—an approach designed to promote free-market pricing that reflects supply and demand.
Adding to the concerns, CORAN highlighted ongoing difficulties faced by domestic refineries in sourcing enough feedstock (crude oil essential for refining). They called on the government to rigorously enforce the DCSO policy as stipulated by the Petroleum Industry Act (PIA). Moreover, they proposed expanding the Naira-for-Crude policy—currently limited to refineries producing petrol—to all operational refineries. Such a move could help stabilize refinery operations, reduce the country’s reliance on foreign currency, and foster a more resilient industry.
The association also strongly advocates for clearer regulations and a more predictable business environment. They believe that simplifying approval processes and committing to stable policies will encourage more local and foreign investments—key drivers for Nigeria’s economic diversification and industrial growth.
As CORAN points out, ongoing government and industry collaboration is crucial. They affirm their readiness to partner with policymakers to realize the dream of a Nigeria that refines enough for local consumption and exports the surplus. With the right policy mix, they argue, Nigeria’s refining sector could become a vital pillar for economic growth, job creation, and industrial development.
Meanwhile, Komolafe reassures the industry that NUPRC remains committed to effective regulation without stifling growth. He revealed that in January, the commission outlined a five-point plan aimed at boosting oil production in 2025, emphasizing the government’s commitment to the ‘willing seller, willing buyer’ approach—aligned with international standards—and promising ongoing support for upstream sector stakeholders. He added that the commission is always open to constructive dialogue to address operational challenges, provided such discussions contribute positively to Nigeria’s energy future.
So, the question remains: Is Nigeria’s current crude pricing model truly working in the country’s best interest, or is it time for a fundamental rethink? Do you think a more regulated, transparent system could better serve Nigeria’s vision of energy independence and economic resilience? Drop your thoughts in the comments—this debate is just getting started.
