Fuelling growth, not just cars: The case for a phased domestic crude allocation (PART 1)

Nigeria does not need to sell every barrel it pumps. It needs to keep enough at home, priced sensibly, to stop taxing its own economy through the price of fuel.

That is the entire logic of a phased domestic crude allocation policy: direct the crude required to meet Nigeria’s own fuel needs — not the full nameplate capacity of any single refinery — to domestic refining at a discount, in place of international sale. Done at the right scale, it delivers the lowest sustainable fuel price economy-wide and creates the fiscal space to fund security, education, and judicial reform. Done at the wrong scale, it becomes economically sound but fiscally reckless. The difference is sizing.
Sizing the policy correctly

The number that should anchor this policy is domestic consumption, not any refinery’s total processing capacity. Petrol demand has run between roughly 51 and 60 million litres per day through early 2026, with diesel adding a further 19 to 24 million litres, alongside smaller volumes of kerosene and LPG. Converted to crude equivalent, that basket requires somewhere between 350,000 and 450,000 barrels per day — the volume that determines the real scale of the trade-off, independent of any refinery’s broader export ambitions.

What it costs

At crude prices of $65 to $72 per barrel — roughly where the market has sat through 2025 and into 2026 — supplying that volume to domestic refining at cost, rather than selling it internationally, means foregoing $8 to $11 billion in gross annual crude revenue, or approximately N12 to N16 trillion. Netting out the lifting and operating costs NNPC would have incurred regardless of where the crude was sold, the true net fiscal cost falls to roughly N10 to N13 trillion — $7 to $9 billion annually.

“Nigeria does not need to speculate about whether this mechanism works. It has already run the experiment, in both directions, inside a single twelve-month period.”

That is a fraction of Nigeria’s total 2025 oil revenue base of approximately N55.5 trillion — roughly one-seventh to one-fifth. It is financeable through existing fiscal space, a portion of the foreign exchange savings the policy itself generates, and modest, time-bound borrowing.

The proof of concept already exists.

Nigeria does not need to speculate about whether this mechanism works. It has already run the experiment, in both directions, inside a single twelve-month period. When local crude producers withheld feedstock from domestic refining in 2026, forcing reliance on imported crude at full international prices, pump prices spiked above N1,300 per litre. When domestic crude supply was adequate, ex-depot petrol prices fell to around $0.45 to $0.53 per litre — roughly half the spike price. The mechanism is not theoretical.

Why this is not free money

A $7 to $9 billion annual gap must be financed before any offsetting tax revenue from a more competitive economy materialises, and Nigeria’s debt service already consumes a large share of federal revenue. Three features make the gap manageable rather than reckless. First, it is roughly comparable in scale to the foreign exchange Nigeria is already saving from reduced petrol and diesel imports — independently estimated at up to $10 billion annually — so the policy substitutes one source of fiscal relief for another rather than opening a wholly new hole. Second, the volume involved is modest relative to total national crude output, so Nigeria retains the large majority of its export base for foreign exchange earnings and debt service. Third, single-digit billions in annual borrowing is a scale Nigeria’s existing relationships with multilateral lenders and domestic capital markets can plausibly absorb, provided it is structured as time-limited bridge financing tied to measurable milestones.

A phased sequence, not a single decision

Phase 1 (Year 1) pilots at the lower bound: 350,000 barrels per day at a discounted price — 60 to 70 percent of the international price, not bare lifting cost — capping fiscal exposure while the operational and monitoring architecture is built. Phase 2 (Years 2–3) scales to the full 400,000–450,000 barrel domestic requirement, contingent on Phase 1 showing measurable pump price reduction and inflation relief. Phase 3 (Years 3–5) reviews the discount structure and allocation mechanism against real inflation, FDI, and tax-base data, adjusting as needed to keep the policy sustainable.

The crude allocation itself is the easy half of this policy. Part 2 addresses the harder half: making sure the fiscal space it creates is not simply absorbed into general spending but is ring-fenced for the security, education, and judicial reforms that determine whether cheaper fuel actually converts into investment.

The author is an independent Nigerian policy analyst and venture capitalist. This analysis draws on publicly reported 2025–2026 production, consumption, and pricing data from NUPRC, NMDPRA, OPEC, and the Nigerian financial press. Figures are order-of-magnitude estimates intended to inform policy direction. The full policy paper, with greater technical and financing detail, is available on request from the author at [email protected].