Nigeria’s journey toward achieving domestic petroleum refining self-sufficiency has encountered significant challenges, as fuel prices have begun climbing once again following Dangote Refinery’s announcement that it has temporarily suspended naira sales of petroleum products.
According to market surveys conducted by KIIN360, petrol prices in Lagos reached N940 per litre on Monday, representing a sharp increase from the N860 per litre recorded in March. This price surge coincides with the 650,000 barrels per day refinery’s explanation that its naira-denominated petroleum product sales have exceeded the value of naira-denominated crude oil it had received under the government’s naira-for-crude policy.
Despite recent progress in domestic refining capabilities, including the NNPC-owned Port Harcourt refinery celebrating 180 consecutive days of operations after a 30-year hiatus and similar developments at the Warri refinery, Nigeria continues to rely heavily on imported fuel. National Bureau of Statistics data reveals that petroleum import costs surged by 105.3 percent in 2024, reaching N15.42 trillion compared to N7.51 trillion in 2023. In the five months leading to February, Nigeria imported approximately 6.38 billion litres of petrol and diesel.
Industry analysts point to fundamental structural mismatches in the sector. While Nigeria currently produces between 1.4 million and 1.53 million barrels per day (against an OPEC quota of 1.5 million bpd), domestic refiners require an estimated 985,000 bpd. This production gap means Nigeria cannot fully satisfy domestic refining needs while meeting export obligations.
The effectiveness of the government’s naira-for-crude arrangement has come under scrutiny. Throughout most of 2024, Dangote Refinery’s local market supply costs remained comparable to the landing costs of imported petrol, failing to create the anticipated price advantage that would naturally reduce imports through market mechanisms. Without a consistent price spread of around N100 per litre between Dangote products and imported alternatives, importers have maintained market viability.
According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority, national daily petrol consumption ranges between 45 and 50 million litres. While Dangote Refinery claims a production capacity of 57 million litres daily and reports current market supply of 33 million litres per day, ongoing fuel imports suggest that production at rehabilitated NNPC refineries remains below optimal levels.
The temporary decrease in petroleum prices observed recently appears linked more to declining international crude oil prices rather than effective domestic competition. Market analysts warn that if crude prices climb back to $80 per barrel while the naira maintains its current valuation, consumers should expect further price increases.
Industry experts suggest that Nigeria needs additional market participants to create genuine competition in the domestic refining sector. The anticipated entry of BUA Refinery and the full rehabilitation of NNPC’s 445,000 bpd capacity facilities are viewed as critical steps toward establishing a more competitive and consumer-friendly petroleum market.
As Nigeria continues navigating these challenges, the path to sustainable domestic refining and fuel price stability remains fraught with complexities requiring strategic policy interventions and increased private sector participation
