While oil exports contribute more than 90% of Nigeria's foreign exchange revenues, it is not clear that the allocation of more oil to export than to domestic utilization has been optimal. The country increased its refining capacity from 160 Mbpd in 1979 to 445 Mbpd in 1989, while in the same decade, oil exports as a percentage of production increased rapidly from 76% to 89%. By 2009, 99% of Nigeria's production went to export at the expense of domestic refining capacity utilization, which plummeted to 7% with the consequence that >80% of domestic consumption of refined petroleum products was imported. This paper examines the end-use of Nigeria's oil production. It proposes a framework within which the crude oil produced in Nigeria can be optimally delivered to maximize net income. A mathematical model for optimal allocation of crude oil, based on a transshipment framework, is espoused and applied to maximize net income, subjects to certain plausible constraints. The constraints identified total domestic refining capacity, offshore refining capacity, upstream oil production, and domestic refined petroleum product demand. The results indicate that the optimal product import&swapped/demand ratio ought to have ranged from 78% (2010) to 100% (2016) instead of the actual 76% (2010) to 87% (2016). Additionally, the optimum import&swapped/demand ratio could have resulted in more product imports than the actual in 2015, 2016 and 2017. However, the model results suggest that from 2018 to 2020, actual petroleum product imports have been consistent with the optimized import&swapped/demand ratio.
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