Nigeria’s refining revolution has a monopoly problem

Nigeria marked a major economic milestone on September 14, 2026, with the opening of the initial public offering (IPO) of Dangote Petroleum Refinery, the largest IPO in African history. Located in the Lekki Free Zone in Lagos, the refinery now has a crude-processing capacity of 700,000 barrels per day, up from 650,000, and cost approximately $20bn to build. It was commissioned in May 2023, while production of diesel and jet fuel began in January 2024, followed by the start of petrol supplies to the local market in September that year.

At the opening of the IPO, Dangote Group president Aliko Dangote said: “We fully share all our prosperity with the people. That’s why we call this the ‘People’s IPO’.” Days earlier, as the IPO documents were signed, he had presented the refinery as part of a broader African industrial project: “The refinery means too much to our continent. We can’t industrialise if we don’t have energy security.”

The contrast with Nigeria’s state-owned refineries could hardly be starker. While construction of the Dangote Refinery was under way, the government-owned facilities in Port Harcourt, Warri and Kaduna continued to struggle amid allegations of corruption, weak operational capacity, chronic political interference and an overreliance on short-term contracting models. Over the past two decades, estimates of spending on rehabilitation and turnaround maintenance range from more than $18bn to as much as $25bn, yet the refineries have remained largely dormant or operated at negligible capacity for much of the past decade.

This failure had severe consequences for Nigeria’s energy sector. For years, the country depended on imports for most of its domestic demand for petroleum products, particularly petrol and diesel. This placed immense pressure on foreign exchange reserves and the national budget, as billions of dollars were spent on fuel subsidies, while leaving the domestic market exposed to global price volatility and recurring fuel shortages.

With the launch of large-scale domestic refining projects such as Dangote, Nigeria has begun to move away from its longstanding reliance on exporting crude oil while importing much of the refined fuel it consumes. This shift has coincided with major reforms in the downstream oil sector. The government eliminated the costly petrol subsidy, allowing prices to move towards market levels, and introduced a “crude-for-naira” mechanism under which domestic refineries could buy crude oil in local currency rather than dollars. The scheme was intended to reduce pressure on foreign exchange and improve the supply of crude to local refiners.

The impact of increased domestic refining is already visible in Nigeria’s fuel trade. The country’s petrol imports have fallen from about 400,000 barrels per day in 2024 to about 83,000bpd this year. While the country has not eliminated its need for imported fuel, its dependence on imports has fallen sharply.

Yet the expansion of domestic refining has not delivered the lower fuel prices many Nigerians expected. Following the removal of the petrol subsidy and the shift towards market-based pricing, petrol prices rose from about 185 naira ($0.14) per litre before the reforms to more than 1,000 naira ($0.75) per litre, with prices continuing to fluctuate according to market conditions. The increase has fed into higher transport and production costs, adding to already severe inflationary pressures and placing a heavy burden on households. The broader cost-of-living crisis has also fuelled repeated protests and trade union action.

Domestic refining does not, by itself, insulate Nigeria from global oil prices or exchange-rate fluctuations. Refineries must still obtain crude at prices linked to international markets, while shortfalls in domestic crude supply have at times forced Dangote to buy part of its feedstock abroad in dollars. This means movements in global oil prices and the naira can still affect the cost of fuel sold domestically.