Authored By: Emmanuel Omole
University of Lagos
I. INTRODUCTION
In late August 2026, a Federal High Court in Lagos restrained Nigeria’s midstream petroleum regulator from shutting down operations at the continent’s largest oil refinery.1 Months earlier, in a separate suit before the same court, the refinery’s owner had accused the national oil company of denying it adequate crude while defending the very fuel imports the refinery was built to replace.2 That a facility conceived to end Nigeria’s dependence on imported petroleum should now be locked in litigation against the agencies charged with supporting it says something about how uneasily Nigeria’s newest petroleum statute sits with commercial reality.
Nigeria is Africa’s leading crude oil producer and a founding member of OPEC, yet for most of its post-independence history it has exported the bulk of its crude while importing the refined products its population consumes. The Petroleum Industry Act 2021 (PIA) set out to correct this paradox through two linked provisions: section 109, which obliges upstream producers to reserve crude for domestic refineries, and section 317(9), which restricts the licensing of finished product imports.3 Together they form the statutory core of Nigeria’s ambition to convert its crude endowment into refining capacity, energy security and foreign exchange savings.
This article argues that although the PIA’s domestic supply architecture is textually coherent, its reliance on market-determined pricing, an executive policy improvised outside the Act, and an undefined statutory threshold have pushed implementation away from predictable regulation and into ad hoc bargaining and, increasingly, litigation. Part II sets out the statutory and regulatory framework. Part III examines regulatory practice and the emerging case law. Part IV offers a critical evaluation. Part V draws comparative lessons from Indonesia. Part VI concludes.
II. THE LEGAL FRAMEWORK
A. The Domestic Crude Oil Supply Obligation
Section 109 of the PIA empowers the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to impose a Domestic Crude Oil Supply Obligation (DCSO) on lessees of upstream petroleum operations, requiring them to set aside crude for domestic refineries before exporting the remainder.4 Section 318 defines the obligation as the duty of an upstream producer to dedicate a specified volume of crude to domestic refineries as stipulated in section 109.5
The framework divides responsibility between NUPRC and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). NMDPRA must regularly furnish NUPRC with the crude requirements of operating refineries and notify it of any shortage, while NUPRC facilitates supply to the affected facilities on receiving that information.6 Only refineries holding a valid operating licence qualify for allocation.7 Crucially, the PIA does not permit NUPRC to fix a subsidised price. Crude sold under the obligation must be commercially negotiated between producer and refiner on a willing-buyer, willing-seller basis, having regard to the prevailing international market price for the same or similar grade, and the refining licensee must furnish payment guarantees prescribed by the producer.8
NUPRC operationalised this through the Production Curtailment and Domestic Crude Oil Supply Obligation Regulations 2023 (DCSO Regulations), which subject all crude produced by a lessee to the obligation and permit export only once the domestic allocation has been set aside.9 The DCSO Regulations build a transparent allocation cycle: NUPRC must publish, twice yearly, the refining requirements of every operating refinery and the corresponding production data of every producing lessee,10 before matching unmet demand to supply through a Request for Quotation process triggered whenever NMDPRA reports a shortage.11 Non-compliance carries a real cost. A lessee that fails to deliver its allocated volume is liable to an administrative penalty of fifteen per cent of the fiscal price of the shortfall,12 may have its export permit application refused and risks revocation of its licence, subject to a defence of force majeure or default by the refining licensee.13
B. The Downstream Import Proviso
The DCSO addresses feedstock, but Nigeria’s import dependence operates at both ends of the value chain. Section 317(9) of the PIA supplies the downstream counterpart, restricting the issuance of import licences for refined petroleum products. The precise scope of that restriction is, at the time of writing, the subject of live litigation. Dangote Petroleum Refinery and Petrochemicals FZE (Dangote Refinery), whose 650,000 barrel per day facility in Lekki is Africa’s largest, contends that section 317(9) permits the licensing of product imports only where there is a proven shortfall in domestic supply, and that the continued issuance of import licences to the state oil company and independent marketers therefore breaches the Act.14 The Nigerian National Petroleum Company Limited (NNPC) resists that construction, arguing that neither the PIA nor the government’s Backward Integration Policy imposes a blanket prohibition on imports, and that NMDPRA retains lawful authority to license importers with an established trading record even where domestic refining capacity exists.15
III. REGULATORY PRACTICE AND EMERGING CASE LAW
The gap between the PIA’s text and its implementation is best illustrated by two developments that sit outside the Act’s own machinery. The first is the Naira-for-Crude Initiative. Because section 109(3) pegs domestic crude sales to the international market price, the DCSO alone does nothing to shield a refiner from foreign exchange volatility, since even a naira-denominated sale at international parity still requires the refiner to source the dollar equivalent to remain competitive. In October 2024 the Federal Executive Council directed that a portion of crude destined for domestic consumption be sold to Nigerian refineries in naira rather than dollars, with Dangote Refinery as pilot beneficiary.16 The scheme was not a PIA instrument but an executive policy administered by a ministerial steering committee, and it showed the instability that comes with governing by improvisation rather than by rule. Structured initially as a six-month contract, it lapsed in March 2025 amid public disagreement over whether it had been unilaterally terminated, before NNPC and the refinery signed a fresh two-year agreement in August 2025 under which roughly sixty per cent of allocated volumes continued to be sold in naira.17 The episode reveals a framework that could not, on its own statutory terms, deliver the affordability its architects intended.
The second development is more direct. In 2026, the tension between Dangote Refinery and its regulators moved from negotiation to the courtroom. In one suit, the refinery is challenging the renewal of fuel import licences issued to NNPC and independent marketers, contending that the licensing breached both section 317(9) and an earlier order preserving the status quo pending trial.18 NNPC has filed a counter-affidavit arguing that Dangote’s own pricing has been high and volatile, and that import competition remains necessary to protect consumers from what it calls monopoly pricing, an argument that places Nigeria’s national oil company, remarkably, on the same side as the independent importers whose licences the refinery seeks to cancel.19
In a second and more recent suit, the refinery obtained an interim injunction restraining NMDPRA from enforcing a directive that suspended the loading of petroleum products from its Lekki Free Zone facility, after the court found a serious question as to whether NMDPRA possesses any regulatory authority over operations conducted within a free trade zone.20 Neither suit has been finally determined, and both should be read as evidence of live doctrinal uncertainty rather than settled principle. Together, however, they show that provisions drafted to end a decades-old trade paradox are now generating exactly the institutional conflict they were meant to resolve.
IV. CRITICAL EVALUATION
With the framework and its practice in view, the question is whether the fault lies in the design or in the implementation. Domestic supply obligations of this kind give domestic legal effect to a state’s permanent sovereignty over its natural resources, a principle recognised in international law since the 1962 United Nations General Assembly Resolution on Permanent Sovereignty over Natural Resources, and given constitutional form in Nigeria by section 44(3) of the 1999 Constitution, which vests all petroleum resources in the Federation.21 The PIA gives that sovereignty commercial teeth without simply confiscating it: by requiring that crude sold under the DCSO be priced at international parity, the drafters avoided turning the obligation into an uncompensated taking of producers’ property. Yet the same choice denies domestic refiners any durable cost advantage over simply importing similar crude grades from abroad.
It is submitted that this helps explain why Dangote Refinery has continued to import substantial volumes of American crude notwithstanding an active statutory obligation on Nigerian lessees to supply it:22 an obligation to sell at export parity gives a producer little commercial reason to prefer the domestic buyer, and gives the refiner correspondingly little reason to prefer a domestic seller whose supply has proved less reliable than the international spot market. The DCSO, as drafted, secures availability more effectively than it secures competitiveness, and it is the latter that appears to have driven the refinery back to the import market.
The Naira-for-Crude Initiative was, in effect, an admission of this gap, but its legal foundation is thin. A policy directed by the Federal Executive Council and administered through a ministerial steering committee is not a regulation made under the PIA, cannot be enforced as one, and can be withdrawn or left to lapse with the informality with which it was created. A headline agreement that collapsed within six months and required public clarification and renegotiation is the predictable consequence of trying to solve a pricing problem created by statute with an instrument that sits entirely outside it. If currency-based relief for domestic refiners is a policy Nigeria wishes to sustain, it belongs in the DCSO Regulations themselves, where it would acquire the durability and enforceability that an executive initiative cannot supply.
The undefined threshold in section 317(9) raises a related concern. The PIA nowhere specifies what counts as a proven shortfall, who determines it, or what evidentiary standard applies, leaving the question to be litigated for the first time only after import licences had already been issued and contested in court. NUPRC’s own twice-yearly publication model for crude requirements could easily have been extended downstream: a published, methodologically transparent test for domestic product sufficiency would have given both refiners and importers a predictable standard to plan around, rather than a phrase to be fought over in an originating summons.
Finally, the institutional architecture itself generates friction the PIA does not obviously anticipate. NUPRC regulates upstream supply, NMDPRA regulates midstream and downstream operations, NNPC operates commercially while remaining closely tied to government policy, and free trade zone authorities claim a separate regulatory perimeter that NMDPRA disputes. The free zone litigation is not, at bottom, a dispute about crude or fuel at all, but about which regulator has jurisdiction over the refinery in the first place, a question the PIA’s drafters might reasonably have been expected to resolve within the statute itself.
V. COMPARATIVE PERSPECTIVES
Indonesia offers an instructive comparison as a developing oil-producing state balancing export revenue against domestic supply security. Under Indonesian production sharing contracts, a contractor must reserve twenty-five per cent of its share of crude and gas production for the domestic market, a domestic market obligation (DMO) traceable to Government Regulation 35 of 2004, which requires every production sharing contract to make provision for domestic supply and for the settlement of disputes.23 Ministerial regulation further requires that a contractor’s domestic share be offered first to Pertamina, the state oil company, or to a licensed refiner, at least three months before any export recommendation is sought, giving the domestic market a formal right of first refusal that Nigeria’s shortage-triggered Request for Quotation mechanism only partially replicates.24
The pricing history is instructive. For decades, Indonesia’s DMO carried a price discount below the Indonesian Crude Price, a genuine subsidy that Nigeria’s drafters deliberately avoided when they tied DCSO pricing to international parity from the outset. Yet Indonesia’s 2017 Gross Split reform abolished that discount, moving DMO pricing to the full Indonesian Crude Price, the same market-based logic that already underlies section 109(3) of the PIA.25 The convergence suggests that market pricing, rather than subsidy, is becoming the settled approach to domestic supply obligations internationally, which strengthens the case for treating Nigeria’s difficulty as one of implementation rather than design.
What the Nigerian framework lacks, by contrast, is Indonesia’s contractual embedding. Because the Indonesian obligation is a term of the production sharing contract itself, a dispute over its performance is, in the first instance, a contractual dispute resolved through whatever mechanism the contract provides.26 Nigeria’s DCSO, being a freestanding statutory and regulatory obligation imposed on lessees rather than a negotiated contractual term, has no comparable built-in forum, so that when negotiation breaks down, as it has between Dangote Refinery and its regulators, the dispute has nowhere to go but to the Federal High Court, argued as public rather than contract law. Nigeria could usefully consider writing DCSO compliance more explicitly into the terms of petroleum leases themselves, giving disputes a contractual as well as a regulatory pathway to resolution.
VI. CONCLUSION
Nigeria’s Petroleum Industry Act 2021 set out to resolve a long-standing paradox: that a country producing well over a million barrels of crude a day should remain structurally dependent on imported fuel. This article has argued that the statute’s answer, a domestic crude supply obligation for upstream producers paired with an import restriction for downstream marketers, is not badly designed in principle, but that weak pricing incentives, an executive policy improvised outside the Act, an undefined statutory threshold, and an unresolved question of regulatory jurisdiction have together pushed implementation into instability and, increasingly, litigation. The comparison with Indonesia’s domestic market obligation suggests that Nigeria’s market-based pricing choice is not itself the problem. The problem lies in the gaps around it.
Three reforms would narrow those gaps. First, NUPRC and NMDPRA should extend the transparent, twice-yearly publication model already used for crude requirements to the determination of downstream product shortfalls, giving section 317(9) a measurable standard rather than a contested phrase. Second, any currency-based relief for domestic refiners should be brought within the DCSO Regulations rather than administered as a renewable executive arrangement, so that it acquires the predictability of law. Third, the National Assembly or NUPRC should consider requiring domestic supply obligations to be written into petroleum lease terms directly, following Indonesia’s example, so that disputes over performance can be resolved contractually rather than only through public law litigation. Until these gaps are closed, the courts, rather than the Act, will continue to decide what Nigeria’s newest petroleum statute actually requires.
FOOTNOTE(S):
1 Dangote Petroleum Refinery and Petrochemicals FZE v Nigerian Midstream and Downstream Petroleum Regulatory Authority (Federal High Court, Lagos, Suit No FHC/L/CS/1174/2026, interim ruling of Aluko J, 31 August 2026). See also Wale Igbintade, ‘Court Bars NMDPRA From Shutting Down, Interfering With Dangote Refinery’ (ThisDay, 31 August 2026) <https://www.thisdaylive.com/2026/08/31/court-bars-nmdpra-from-shutting-down-interfering-with-dangote-refinery/> accessed 3 September 2026.
2 Billionaires.Africa, ‘Nigeria’s NNPC Tells a Court That Dangote Petrol Is Too Expensive and Imports Must Continue’ (Billionaires.Africa, 27 May 2026) <https://www.billionaires.africa/2026/05/27/nigerias-nnpc-tells-a-court-that-dangote-petrol-is-too-expensive-and-imports-must-continue/> accessed 3 September 2026.
3 Petroleum Industry Act 2021 (Nigeria), ss 109, 317(9).
4 Petroleum Industry Act 2021 (Nigeria), s 109(2).
5 Petroleum Industry Act 2021 (Nigeria), s 318.
6 Petroleum Industry Act 2021 (Nigeria), ss 109(3) and 113(2).
7 Petroleum Industry Act 2021 (Nigeria), s 109(4)(a).
8 Petroleum Industry Act 2021 (Nigeria), s 109(3).
9 Production Curtailment and Domestic Crude Oil Supply Obligation Regulations 2023 (Nigeria), reg 9(1).
10 Production Curtailment and Domestic Crude Oil Supply Obligation Regulations 2023 (Nigeria), reg 10(2)-(3).
11 Production Curtailment and Domestic Crude Oil Supply Obligation Regulations 2023 (Nigeria), reg 11.
12 Production Curtailment and Domestic Crude Oil Supply Obligation Regulations 2023 (Nigeria), reg 18(2).
13 ibid. See also reg 18(1) (administrative fine for failure to respond to a Request for Quotation), and Magnus Ejelonu and Damilola Akinsanya, ‘Understanding the Domestic Crude Oil Supply Obligation Framework in Nigeria’ (Mondaq, 14 January 2026) <https://www.mondaq.com/nigeria/oil-gas-electricity/1730418/understanding-the-domestic-crude-oil-supply-obligation-framework-in-nigeria> accessed 3 September 2026.
14 Igbintade (n 1).
15 ibid.
16 Daily Trust, ‘Nigeria: Dangote, NNPCL Back to Negotiation Over Naira-for-Crude Deal’ (AllAfrica, 11 March 2025) <https://allafrica.com/stories/202503110082.html> accessed 3 September 2026.
17 BusinessDay, ‘NNPC, Dangote Refinery Ink New Two-Year Crude Supply Deal’ (BusinessDay, 30 September 2025) <https://businessday.ng/energy/article/nnpc-dangote-refinery-ink-new-two-year-crude-supply-deal/> accessed 3 September 2026. See also BusinessDay, ‘Naira-for-Crude Sales Was a 6-Month Agreement, NNPC Clarifies’ (BusinessDay, 11 March 2025) <https://businessday.ng/energy/article/crude-for-naira-sales-was-a-6-months-agreement-nnpc-clarifies/> accessed 3 September 2026.
18 Dangote Petroleum Refinery’s suit against the Attorney-General of the Federation and the Nigerian Midstream and Downstream Petroleum Regulatory Authority over the renewal of fuel import licences (Federal High Court, Lagos, Suit No FHC/L/CS/857/2026, before Aneke J, pending, adjourned to 7 October 2026). See Igbintade (n 1).
19 Billionaires.Africa (n 2).
20 Dangote Petroleum Refinery and Petrochemicals FZE v NMDPRA (n 1).
21 United Nations General Assembly Resolution 1803 (XVII), ‘Permanent Sovereignty over Natural Resources’ (14 December 1962). See also Constitution of the Federal Republic of Nigeria 1999 (as amended), s 44(3).
22 Ejelonu and Akinsanya (n 13), citing Bloomberg ship-tracking data reported in Business Insider Africa (7 June 2025) and Kpler, ‘US Crude Overtakes Nigerian Barrels in Dangote’s Import Mix’ (6 August 2025).
23 Government Regulation 35 of 2004 (Indonesia) on Upstream Oil and Gas Business Activities, art 56. See also Lexology, ‘In Review: Oil and Gas Exploration and Production in Indonesia’ (Lexology, 3 November 2021) <https://www.lexology.com/library/detail.aspx?g=cd6842c1-8b20-4c0e-b8ca-6062b9344b8e> accessed 3 September 2026.
24 Minister of Energy and Mineral Resources Regulation 42 of 2018 (Indonesia) on the Prioritisation of Domestic Crude Oil Utilisation, arts 2-3, 5.
25 Brad Roach and Alistair Dunstan, ‘The Indonesian PSC: The End of an Era’ (2018) 11(2) Journal of World Energy Law and Business 116, 133, citing Minister of Energy and Mineral Resources Regulation 8 of 2017 (Indonesia), art 17(3).
26 Roach and Dunstan (n 25) 116.
BIBLIOGRAPHY
Table of Cases
Dangote Petroleum Refinery and Petrochemicals FZE v Nigerian Midstream and Downstream Petroleum Regulatory Authority (Federal High Court, Lagos, Suit No FHC/L/CS/1174/2026, 31 August 2026) (unreported).
Dangote Petroleum Refinery’s suit against the Attorney-General of the Federation and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (Federal High Court, Lagos, Suit No FHC/L/CS/857/2026) (unreported, pending).
Table of Legislation
Constitution of the Federal Republic of Nigeria 1999 (as amended).
Petroleum Industry Act 2021 (Nigeria).
Production Curtailment and Domestic Crude Oil Supply Obligation Regulations 2023 (Nigeria).
Government Regulation 35 of 2004 (Indonesia) on Upstream Oil and Gas Business Activities.
Minister of Energy and Mineral Resources Regulation 8 of 2017 (Indonesia) on Gross Split Production Sharing Contracts.
Minister of Energy and Mineral Resources Regulation 42 of 2018 (Indonesia) on the Prioritisation of Domestic Crude Oil Utilisation.
United Nations General Assembly Resolution 1803 (XVII), ‘Permanent Sovereignty over Natural Resources’ (14 December 1962).
Secondary Sources
Billionaires.Africa, ‘Nigeria’s NNPC Tells a Court That Dangote Petrol Is Too Expensive and Imports Must Continue’ (Billionaires.Africa, 27 May 2026) <https://www.billionaires.africa/2026/05/27/nigerias-nnpc-tells-a-court-that-dangote-petrol-is-too-expensive-and-imports-must-continue/> accessed 3 September 2026.
BusinessDay, ‘Naira-for-Crude Sales Was a 6-Month Agreement, NNPC Clarifies’ (BusinessDay, 11 March 2025) <https://businessday.ng/energy/article/crude-for-naira-sales-was-a-6-months-agreement-nnpc-clarifies/> accessed 3 September 2026.
BusinessDay, ‘NNPC, Dangote Refinery Ink New Two-Year Crude Supply Deal’ (BusinessDay, 30 September 2025) <https://businessday.ng/energy/article/nnpc-dangote-refinery-ink-new-two-year-crude-supply-deal/> accessed 3 September 2026.
Daily Trust, ‘Nigeria: Dangote, NNPCL Back to Negotiation Over Naira-for-Crude Deal’ (AllAfrica, 11 March 2025) <https://allafrica.com/stories/202503110082.html> accessed 3 September 2026.
Ejelonu Magnus and Akinsanya Damilola, ‘Understanding the Domestic Crude Oil Supply Obligation Framework in Nigeria’ (Mondaq, 14 January 2026) <https://www.mondaq.com/nigeria/oil-gas-electricity/1730418/understanding-the-domestic-crude-oil-supply-obligation-framework-in-nigeria> accessed 3 September 2026.
Igbintade Wale, ‘Court Bars NMDPRA From Shutting Down, Interfering With Dangote Refinery’ (ThisDay, 31 August 2026) <https://www.thisdaylive.com/2026/08/31/court-bars-nmdpra-from-shutting-down-interfering-with-dangote-refinery/> accessed 3 September 2026.
Lexology, ‘In Review: Oil and Gas Exploration and Production in Indonesia’ (Lexology, 3 November 2021) <https://www.lexology.com/library/detail.aspx?g=cd6842c1-8b20-4c0e-b8ca-6062b9344b8e> accessed 3 September 2026.
Roach Brad and Dunstan Alistair, ‘The Indonesian PSC: The End of an Era’ (2018) 11(2) Journal of World Energy Law and Business 116.
