Nigeria, Africa’s largest crude oil producer and home to one of the world’s biggest private refineries continues to rely heavily on imported petrol despite reported increases in domestic refining capacity.
Data from the National Bureau of Statistics (NBS) shows that Nigeria imported N3.3 trillion worth of Motor Spirit, Ordinary (petrol) in the last quarter of 2024, making petrol the country’s most imported commodity despite a marginal 0.495% decline in import volumes.
This persistent dependence on imported fuel comes amid expectations that the start of operations at the Dangote Refinery and the restoration of state-owned refineries would significantly reduce the need for imports. However, fuel imports have continued at a staggering rate, raising concerns over Nigeria’s sustained reliance on foreign fuel sources.
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Surprisingly, the importation of petrol is reportedly led by the Nigerian National Petroleum Company Limited (NNPCL), which has continued to rely on fuel imports from Europe. This is despite launching the Port Harcourt Refinery last year as part of an ambitious plan to revive state-owned refineries and reduce the dependence on imports.
While the Port Harcourt Refinery was expected to boost local refining capacity, insiders reveal that the refinery has not reached its projected output levels, leading NNPCL to maintain contracts with European fuel suppliers. The company has neither disclosed the reasons for the refinery’s underperformance nor outlined clear strategies to enhance local production.
According to data from the NMDPRA, January recorded 1,357,044,721 liters of imported petrol, which slightly dropped to 1,343,509,376 liters in February. In March, imports surged to 1,461,889,416 liters, reversing the trend and indicating a greater reliance on outside sources.
The subsequent months saw continued volatility, with imports falling to 1,288,974,567 liters in April before gradually rising to 1,313,440,530 liters in May and 1,398,411,753 liters in June. The second half of the year experienced more fluctuations, peaking in October at 1,524,565,174 liters before a significant drop to 1,253,477,626 liters in November and a rebound to 1,482,726,064 liters in December.
Throughout 2024, Nigeria imported a total of 13.76 billion liters of petrol, overshadowing the 794.37 million liters produced locally between January and May. The discrepancy highlights the minimal impact of local refining efforts on reducing import dependence.
Dangote Refinery’s Strategy to Minimize Fuel Imports
Against this backdrop, the Dangote Refinery is taking bold steps to reduce Nigeria’s dependence on imported fuel by slashing the price of its locally-refined petrol. The $19 billion refinery, with a capacity to process 650,000 barrels of crude oil per day, has introduced competitive pricing to make locally refined products more attractive.
This price reduction strategy is aimed at encouraging market adoption of Nigerian-made petrol over imported variants, thereby reducing forex expenditure and enhancing local value chains. However, this has sparked complaints from marketers, who argue that the lower prices could affect their margins and market dynamics.
Market sources suggest that many marketers, who had previously stocked imported petrol, are now struggling to adjust to the lower prices offered by the Dangote Refinery. They warn that if this trend continues, smaller marketers could face significant financial strain, leading to market disruptions.
Impact on the Nigerian Economy
The high cost of imported fuel is a significant drain on Nigeria’s economy, as it not only leads to increased foreign exchange spending but also contributes to higher fuel prices domestically.
The import-led fuel supply chain also exposes Nigeria to global market shocks, including price volatility and supply disruptions. This dependency undermines national energy security and affects the stability of fuel prices within the country.
The situation suggests that Nigeria’s dependency on imported petrol may not abate soon. Unless the government and stakeholders address the bottlenecks hindering local refineries, the reliance on fuel imports will likely persist. Moreover, the competition between NNPCL’s imported petrol and Dangote Refinery’s local supply may create further market complications.
To achieve self-sufficiency in petrol supply, Nigeria has been advised to improve the operational efficiency of state-owned refineries and support private investments like Dangote Refinery to ensure consistent and affordable fuel supply. Analysts recommend that policymakers create a conducive environment for local refineries to thrive, including addressing infrastructural, security, and regulatory challenges.