….Why world-class refining capacity has not yet delivered stable supply, reduced currency risk or a coherent downstream market

By Sola Adebawo

Nigeria now hosts one of the world’s largest single-train refineries, yet it continues to depend on petrol imports whenever domestic supply falters. That contradiction should concern policymakers more than the recurring argument over whether Dangote Petroleum Refinery is helping or hurting the market.

Using NMDPRA’s latest consolidated monthly figures, domestic petrol supply fell by 20.6 per cent, from 32.5 million litres per day in June 2026 to 25.8 million litres in July. As domestic supply declined, imports increased from 18.1 million litres per day to 19.7 million litres, cushioning part of the shortfall and accounting for 43.3 per cent of total supply.

Even with the additional imports, total petrol supply declined by 10.1 per cent to 45.5 million litres per day.

This is Nigeria’s refining contradiction: substantial installed capacity without sufficiently dependable domestic supply.

The deeper problem is an unresolved policy contradiction. Nigeria is simultaneously trying to protect domestic refining investment, guarantee uninterrupted fuel supply, preserve competition, reduce foreign-exchange demand and shield consumers from severe price shocks.

Each objective is legitimate. But they do not always point in the same direction.

Restricting imports protects domestic refiners but could weaken competition and expose the country to disruptions at a dominant refinery. Allowing imports supports supply security and disciplines local prices, but consumes foreign exchange and may undermine domestic refining. Requiring refiners to sell in naira supports the national currency, but transfers exchange-rate risk to refiners purchasing crude and other inputs in dollars. Market-reflective pricing protects commercial viability but transmits international crude-price and exchange-rate shocks to consumers.

Nigeria has not clearly established which objective should take precedence when these interests collide.

The recent dollar-pricing episode exposed this weakness. In July, Dangote Refinery began quoting petrol, diesel and aviation fuel for the domestic market in US dollars. Petrol was reportedly priced at $0.779 per litre.

The refinery explained that it required between 13 and 15 crude cargoes monthly but received about seven domestic cargoes, forcing it to purchase the balance internationally. Selling products entirely in naira while buying a significant portion of its feedstock in dollars created a currency mismatch.

Petroleum marketers, particularly PETROAN, objected. Their members earn revenue in naira and would have needed to source dollars to purchase products. This would have increased working-capital requirements, exposed them to exchange-rate movements and disadvantaged smaller independent marketers without comparable access to bank financing and foreign exchange.

Dangote subsequently resumed naira sales, fixing petrol at a reported gantry price of ₦1,215 per litre. But the reversal only addressed the immediate payment problem. It did not remove the underlying currency exposure.

A naira invoice does not necessarily create a naira cost structure. The currency in which a product is invoiced is not necessarily the currency in which its economic value is determined.

Nigeria may have localised the physical conversion of crude into fuel, but it has not fully localised the economics of refining. Crude remains internationally traded and dollar-benchmarked. Imported feedstock, financing and replacement costs are substantially dollar-linked. Refiners also have export alternatives through which they can earn foreign exchange.

The better question is therefore not simply whether petrol should be sold in dollars or naira. It is: who should carry the currency risk?

The refinery can carry it, marketers can carry it, consumers can absorb it through higher prices, banks can facilitate hedging, or government can assume part of it through explicit support. But the risk cannot be wished away by regulation. It must be transparently allocated, priced, hedged or subsidised.

The same clarity is required on imports. Not every imported litre serves the same purpose. Some imports cover a verified domestic shortfall. Others provide strategic protection against refinery outages. Some preserve competitive pressure in an increasingly concentrated market.

Imports can only perform these roles credibly when product standards are enforced, access is not preferential and licences respond to a demonstrated market need. Otherwise, import permits may simply create another channel for regulatory privilege and commercial rent.

This is where the political economy becomes unavoidable. The downstream dispute is also a contest over crude allocation, import licences, access to foreign exchange, depot margins, trading income, export earnings and control of distribution.

The competing interests are not equally positioned. Some participants control refining capacity; others possess storage, logistics, financing, import access or regulatory authority. Independent retailers and consumers are comparatively fragmented, yet they bear much of the cumulative cost.

Each participant can therefore present its commercial interest as the national interest. Refiners invoke industrialisation and employment. Importers invoke competition. Marketers invoke reliable distribution. Regulators invoke market stability. Government invokes currency protection. Consumers simply want fuel to be available and reasonably priced.

Dangote Refinery deserves recognition as an extraordinary indigenous industrial investment. But its scale has also made it systemically important. A commercial decision by the refinery can now affect inflation, transport costs, foreign-exchange demand and national supply.

This does not establish misconduct. Market dominance is not automatically abuse of dominance. It does mean, however, that Nigeria must not make its energy security dependent on the uninterrupted operation or commercial calculations of one private company.

The answer is a rules-based compact.

Government should provide refiners with predictable crude supply, transparent pricing and consistent regulation. In return, refiners receiving naira-denominated crude or other policy support should accept measurable domestic-supply and reporting obligations. Such obligations should be prospectively established through legislation, regulatory instruments or crude-supply agreements, not imposed unpredictably after commercial decisions have been made.

Imports should remain available for verified supply deficits, strategic resilience and legitimate competition concerns. The answer is not to eliminate regulatory discretion, which a volatile market requires, but to discipline it through published criteria, auditable data and reasoned decisions.

Consumer protection should not mean forcing refiners to sell below economic cost. It should mean effective competition, transparent pricing, predictable adjustments and targeted assistance for households most exposed to higher transport and energy costs.

Local refining was never going to detach Nigeria completely from international crude prices. Its proper test is whether it delivers more reliable supply, lower logistics exposure, reduced net FX outflows, domestic employment and greater resilience than the former import-dependent system.

Nigeria does not have to choose between protecting Dangote Refinery and protecting consumers. But it must establish how industrial development, energy security, competition and currency stability will be balanced when they conflict.

The country has acquired world-class refining capacity. What it still lacks is a coherent downstream market architecture. Until transparent rules replace recurring negotiations and policy improvisation, every crude-supply dispute, refinery disruption or exchange-rate movement will continue to threaten a national fuel crisis.

Sola Adebawo is an energy industry executive and strategic advisor with nearly three decades of experience across Africa’s oil and gas sector. He is the Chief Executive Officer of Hyphen Partners Limited, a specialist advisory firm focused on policy and regulatory intelligence, strategic communications, market entry, stakeholder strategy, institutional and executive positioning in complex and highly regulated industries.

His writing explores reform, political economy, leadership, the relationship between institutions and public life as well as the institutional forces shaping Africa’s development. He is an author, scholar and ordained minister.