• Local refiners yet deliver cost benefits to Nigerians

Sopuruchi Onwuka

The performance of the domestic fuel production industry dominated the latest report by the Central Bank of Nigeria (CBN) on the country’s trade performance in the past two years.

Although the report from the apex bank differs a little from earlier data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), both point at easing fuel import strain on the economy but highlight that the economy is still largely fired with large volumes of imported fuel.

What is not immediately visible in the sets of data from the two government regulators is the systemic failures that make importation a necessity despite the country’s outsize local refining capacity.

Whereas the rising volume of locally produced fuel brings cheery news, the slow displacement of imports translates to slow recovery of the economy which took a dive when the new government of President Bola Tinubu activated drastic economic reforms upon assumption of office.

The data released by CBN and the NMDPRA capture a period that aligns with the commercial deregulation and liberalization of the domestic fuel market.

The period also carries other markers that include the unification of the nation’s foreign exchange market which literally pushed the value of the Naira off cliff and downhill, galloping inflation and severe fiscal strain on the economy.

The withdrawal of fuel subsidy and other monetary instruments supporting the Naira at the foreign exchange market remarkably triggered steep jumps in the retail prices of transportation fuels at a time when the nation was still import dependent.

Calculations at the time were that Naira devaluation would incentivize local production and export while discouraging large volume imports in the face of acute forex liquidity squeeze.

Indeed, the tough economic measures reflected the health status of the economy Tinubu became president at the end of a debt-ridden administration of the late President Muhammadu Buhari.

Until the present administration of the government came into place, petroleum and its products formed the largest volumes of Nigeria’s imports and exports respectively, featuring in both sides of the country’s balance of payments.

Thus, the performance of the economy in displacing fuel imports with locally produced products was conceived to form critical marker of economic recovery. And the balance of payment report by the CBN posts clear indicators on the direction of the dial.

According to the report, Nigeria’s domestic refineries collectively displaced significant 54 percent of the country’s total fuel imports since 2023 when Tinubu assumed the political leadership of the country; cutting fuel import bill from $14.58 billion in the first three quarters of 2023 through $11.38 billion in 2024 to $6.71 billion in 2025.

The CBN figures revealed, however, that Nigeria continues to spend billions of dollars on significant volumes imported refined fuel to meet local demand despite the hype of hosting world’s largest 650,000 barrels per day single train refinery operated by Dangote Industries Limited, another three plants with collective nameplate of 445,000 barrels per day refining capacity operated by the Nigerian National Petroleum Company (NNPC) Limited, as well as numerous small scalable refining plants that operate across the Niger Delta.

Separate data from the NMDPRA for the period between November 2024 and November 2025 shows that the domestic fuel market received significant 20.35 billion litres of petrol. But disturbingly, 12.96 billion litres of the petrol supplied the local market were imported, leaving domestic supply performance at about 7.39 billion litres in the period.

The regulator’s data also showed that imported petrol accounted for average of 63.7 per cent of total supply during the period, while local production accounted for the remaining 36.3 per cent. The data indicated that large scale imports controlled petrol supply most of the months in the period as local retailers adopted creative means of meeting fuel specifications with blending plants.

Independent investigations by Oracle Intelligence into the raging feud among supply factors that build factions in the domestic fuel market showed high level of local blending activity that relies on a mix of locally produced naphtha and imported high octane gasoline. This might have also led to dominance of imported fuel in the country as marketers go creative in maximizing the advantages of deregulated and liberalized market.

According to the NMDPRA, imported petrol rose to 1.12 billion liters or significant 66.8 percent of the 1.68 billion liters supplied the domestic market in November 2024. The data showed that domestic refiners supplied only 560 million liters in the month. The following December importers brought in 1.31 billion liters or 81.1 percent of the 1.62 billion liters of petrol supplied the domestic fuel market in the month.  Domestic refiners accounted for mere 307 million litres or 18.9 percent of petrol supplied in the month.

Dangote Refinery however continues to challenge the NMDPRA’s market data, saying it has capacity to meet total domestic demand for petrol.

The period hosting more recent months have also seen the sharp increase in the contribution of local refineries to domestic petrol supply, even though fluctuations in in supply volumes continue to shape market data.

The regulator’s data do not provide details of specifications of imported petrol, leaving no clues for determining if the imported petrol is also used by local players to blend in locally produced naphtha for enhanced volume optimization.

Thus, modular refineries which produce naphtha in the country could take some credit if some of the supplied petrol were used for blending. The blending scenario further cuts down the role of Dangote and NNPC refineries in domestic fuel supply in the period.

The underplayed role of modular refineries in meeting domestic fuel demand therefore appears to account for the gaps between the sets of data churned out by the CBN on the one hand and the NMDPRA on the other hand. Indications are high that the CBN figures might have assigned the outputs from blending plants to local production volumes without acknowledging the role of imported high octane gasoline in the process.

Overall, the recent CBN import data resolves the longstanding argument over domestic fuel market control, as deregulation and liberalization trigger the much-canvassed market competition. The official data showed that the local refineries do not actually hold the ace as market competition transforms to feud, despite all official incentives that guarantee them crude oil feedstock procurement even in local currency.

The continued reliance on imported petrol despite outsized local refining capacity therefore points to deeper and more disturbing systemic defects. It is either the local refineries suffer critical capacity suboptimization that inhibits economies of scale and compels tendencies for high margins, or they run a business model that ignores the peculiar need for cheaper fuel specifications.

Either way, large supply gaps or high price of products at local refineries create commercial opportunities for offshore refineries, oil traders and local marketers. And these two factors remain the subjects of disputes between Dangote Refinery and key marketing blocs in the domestic market.

Current competition between Dangote Refinery and importers has shifted to control of price floor, with some private marketers selling petrol at N737 per liter which is below the N739 per liter price floor set by the MRS market bloc that is fed by Dangote Refinery. And the local refining company has been relentlessly denying the allegation that it has been unable to provide sufficient supply to the market.

In whichever case, the strong import presence in the country’s fuel supply system comes with disturbing signal that the expected cost benefit of local refining might be lost to the economy if imported and locally produced petrol still compete kobo for kobo over retail prices. It is expected that locally refined petrol should significantly cost lower when myriads of import associated costs are discounted.

If foreign refiners sell far cheaper, and local marketers find greater margin opportunities in fuel importation, then the margin incentive becomes very compelling; underscoring the scale of Nigeria’s continued dependence on imported products, and the country’s exposure to foreign exchange pressures.

Sadly, the prevailing situation which points to low performance of local refiners in fuel cost reduction will also continue to expose the economy to foreign exchange volatility and global price shocks.

Whereas the market remains commercially deregulated, phasing out fuel importation requires more than an idle market umpire. It calls for very active regulator that places national economic aspirations at the fore of its roles: a regulator powerful enough to bring every player under control while smoothening entry and growth processes in the domestic refining industry.

Already, the outlook looks bright with multiple greenfield refining projects that would elevate price competition beyond few players and dismantle import necessity.

With planned revamp of NNPC refineries under an incorporated joint venture, progress at the sites of BUA refinery project, growth agenda of smaller refineries like Waltersmith’s Ibigwe Refinery  and Aradel’s Ogbele Refinery, as well as the announced ambition of Dangote Refinery to scale processing capacity to 1.4 mbd; the goal of creating a robust crude oil refining industry seams feasible in the near future. Realizing this goal should form the core of regulatory agenda.