Dangote Refinery transforms Nigeria into emerging fuel export hub — EIU

Stanley Ihedigbo

Economist Intelligence Unit (EIU) has stated that the operational ramp up of the 650,000 barrels per day Dangote Petroleum Refinery & Petrochemicals is fundamentally reshaping Nigeria’s downstream petroleum sector and significantly reducing the country’s reliance on imported refined fuel products.

In its latest assessment of Nigeria’s fuel market and regulatory environment, the EIU noted that the refinery has already altered the structure of a sector that had for decades depended heavily on imported petroleum products despite Nigeria being Africa’s largest crude oil producer.

According to the report, the Dangote Refinery met nearly 80 per cent of Nigeria’s domestic petrol demand in April and has now attained production levels capable of satisfying local consumption requirements as it approaches full operational capacity.

The EIU described Nigeria’s downstream oil sector before the emergence of the refinery as “long dysfunctional,” stressing that the country had remained largely dependent on imported refined petroleum products while producing almost 1.5 million barrels of crude oil daily.

“The gradual ramp up of the 650,000 barrel/day Dangote refinery since May 2023 has transformed Nigeria’s long dysfunctional downstream sector,” the report stated.

“The country’s main refineries, all state-owned, had been inoperative for years and Nigeria was almost entirely reliant on costly imported fuel.”

The report further stated that the refinery’s growing operations have reduced Nigeria’s dependence on fuel imports, improved domestic fuel supply and strengthened the country’s balance of payments position through lower import demand and increasing exports of refined petroleum products.

According to the EIU, the attainment of full operational capacity at the refinery, alongside planned expansion projects, is expected to significantly support Nigeria’s economic growth and foreign exchange earnings over the medium and long term.

“Meanwhile, the attainment of full capacity at, and an increase in exports from, the Dangote refinery will support real GDP growth and foreign exchange earnings in 2026 and 2027 and beyond, as a planned doubling of the plant’s output comes on stream around the end of the decade,” the report added.

Industry analysts believe the refinery is increasingly positioning Nigeria as a major refining and export hub in Africa, changing regional energy trade patterns and reducing the economic vulnerabilities associated with heavy dependence on imported fuel.

The EIU also observed that the refinery’s emergence coincided with significant reforms in Nigeria’s downstream petroleum sector, including the removal of fuel subsidies and the adoption of market-driven pricing mechanisms.

However, the report noted that the transition from a state-dominated fuel import structure to large-scale domestic refining has generated resistance from interests tied to the former import regime.

The latest controversy followed the decision of the Nigerian Midstream and Downstream Petroleum Regulatory Authority to relax restrictions on petrol imports despite the refinery’s increasing capacity to meet domestic fuel demand.

In response, Dangote Industries instituted legal action, arguing that continued import approvals undermine domestic refining investments and run contrary to the objectives of the Petroleum Industry Act, which seeks to encourage local refining capacity and reduce dependence on imported petroleum products.

Analysts further noted that the availability of large-scale domestic refining capacity has improved Nigeria’s energy security while reducing exposure to global supply disruptions and foreign exchange volatility.

The Centre for the Promotion of Private Enterprise (CPPE) also warned against excessive fuel importation, stressing that such policies could weaken Nigeria’s industrialisation efforts and discourage investments in domestic refining.

Chief Executive Officer of CPPE, Muda Yusuf, said Nigeria’s longstanding dependence on imported fuel had historically exerted pressure on foreign reserves, contributed to exchange rate instability and created fiscal leakages.

The refinery’s growing economic impact is also becoming visible in Nigeria’s broader macroeconomic indicators. Earlier this month, S&P Global Ratings cited increased domestic refining capacity and rising hydrocarbon exports among the major factors supporting Nigeria’s sovereign credit rating upgrade — the country’s first such upgrade in 14 years.

Beyond Nigeria, analysts said the Dangote Refinery is increasingly being viewed as a strategic industrial asset for Africa, where many countries still rely heavily on imported fuel despite rising demand for transportation, manufacturing and electricity generation.

With its expanding refining capacity and export potential, the refinery is expected to play a major role in strengthening regional energy supply chains while boosting Nigeria’s position in the global energy market.