Nigeria’s petrol import bill surged to a historic N15.42 trillion in 2024, more than doubling the N7.51 trillion recorded in 2023, despite increased domestic refining capacity.
The alarming 105.3% rise underscores the nation’s persistent reliance on imported fuel, raising questions about the effectiveness of recent investments in local refineries.
Expectations were high that Nigeria’s dependence on fuel imports would decline following the operationalization of the 650,000-barrel-per-day (bpd) Dangote Petroleum Refinery and ongoing rehabilitation of the country’s three state-owned refineries. However, these hopes have not materialized as local refineries have struggled to achieve full production capacity to meet domestic demand.
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Instead of easing the import burden, Nigeria’s fuel import bill shot up to the largest in its history, with recent data from the National Bureau of Statistics (NBS) revealing a worrying trend of rising import costs over the last five years. The import bill, which stood at N2.01 trillion in 2020, increased to N4.56 trillion in 2021, jumped to N7.71 trillion in 2022, and slightly dropped to N7.51 trillion in 2023 before hitting N15.42 trillion in 2024.
No Crude Oil for Local Refineries
The situation is expected to worsen as the Nigerian National Petroleum Company Limited (NNPCL) has reportedly informed local refiners that it has no crude oil for them. The NNPCL explained that its crude oil is tied to forward obligations, leaving local refineries, including the Dangote Refinery and the 210,000 bpd Port Harcourt Refining Company (PHRC), to source crude oil from international markets.
Under the scheme, the Federal Executive Council (FEC) allocated 450,000 barrels of crude per day for domestic consumption, with the Dangote Refinery as the pilot project. The NNPC was to supply at least 385,000 barrels per day (bpd) to the refinery, which has a capacity of 650,000 bpd. However, the national oil company has failed significantly.
The NNPCL has also suspended its naira-for-crude arrangement with Dangote Petroleum Refinery and other local refineries. The naira-for-crude initiative was launched on October 1, 2024, to reduce Nigeria’s dependence on costly petroleum product imports, conserve foreign exchange (FX), and bring down petrol prices. The initiative allowed local refineries to buy crude oil in naira instead of dollars, a measure aimed at stabilizing the local currency and ensuring consistent supply to domestic refiners.
This development is a significant blow to the local refining sector, as it suggests that even with increased refining capacity, Nigeria will still need to import refined products or import crude oil to keep the refineries running. This scenario could further escalate Nigeria’s already ballooning fuel import bill and increase the pressure on the nation’s foreign reserves.
Between September 11 and December 5, 2024, oil marketers imported 2.3 billion liters of petrol, highlighting the persistent need for imported fuel despite the commencement of production by the Dangote and Port Harcourt refineries. In total, 6.38 billion liters of Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO) were imported in the past five months alone.
The Major Energies Marketers Association of Nigeria (MEMAN) defended this strategy, stating that importation fosters competition and helps keep pump prices in check. MEMAN’s Executive Secretary, Clement Isong, noted, “What importation does for us is that it contributes to the market’s competitiveness. The price movements you are enjoying and the market competition are the result of importation. Importation is useful.”
The inability of NNPCL to supply crude oil to local refineries is a critical setback. The company’s forward obligations mean that its crude oil is pre-committed to international deals, leaving domestic refiners stranded. This has forced local refineries to turn to the international crude market, which is both costlier and logistically challenging.
This development undermines the federal government’s ambition of achieving energy self-sufficiency and reducing Nigeria’s dependence on imported refined products. Instead of becoming a net exporter of refined petroleum, Nigeria may find itself importing both crude oil and refined products simultaneously, leading to a paradoxical situation that compounds forex demand and puts additional pressure on the naira.
Experts Warn of Economic Strain
Industry analysts have expressed concerns that if local refineries are forced to import crude oil at international prices, it will translate into higher production costs for locally refined fuel. Given that the Dangote Refinery and other local refineries must now compete with international importers for crude, there is a high likelihood that fuel prices in Nigeria could remain high or even increase further.
The impact of Nigeria’s fuel import dependency extends beyond the energy sector. Economists have noted how it affects forex reserves, disrupts fiscal planning, and contributes to inflationary pressures as imported fuel costs remain susceptible to global market fluctuations. The persistent demand for forex to pay for fuel imports is also noted to undermine efforts by the Central Bank of Nigeria (CBN) to stabilize the naira and manage inflation.
The situation is said to also have the potential of forcing the return of fuel subsidies, which the government announced its removal in 2023, as part of its reforms to free up funds for developmental projects.