The Dangote Petroleum Refinery is helping to reduce pressure on Nigeria’s foreign exchange market by lowering the country’s dependence on imported fuel, according to a new report by the Economist Intelligence Unit (EIU).
In its latest review of Nigeria’s downstream petroleum sector, the London-based research firm said the gradual increase in production at the 650,000 barrels-per-day refinery has significantly changed the country’s fuel supply structure.
The report noted that Nigeria had relied heavily on imported refined petroleum products for years despite being one of Africa’s largest crude oil producers. However, the refinery’s growing operations are now improving local fuel availability and cutting the need for large fuel import bills.
According to the EIU, the refinery supplied close to 80 per cent of Nigeria’s petrol demand in April as production levels moved closer to full operational capacity.
The report added that lower fuel imports are helping Nigeria’s external balance by reducing demand for foreign currency while also supporting exports of refined petroleum products.
The EIU described Nigeria’s downstream oil sector before the refinery came on stream as inefficient and overly dependent on imported fuel due to years of inactivity at state-owned refineries.
It further stated that full-scale operations at the Dangote refinery, alongside future expansion plans, could strengthen Nigeria’s economic growth and boost foreign exchange earnings in the coming years.
The report also linked recent reforms in the sector including the removal of fuel subsidies and the adoption of market-based pricing to the changing structure of the fuel market.
However, the EIU noted that the transition to large-scale local refining has faced opposition from interests tied to the fuel import business.
This follows ongoing disagreements over fuel import approvals after the Nigerian Midstream and Downstream Petroleum Regulatory Authority eased restrictions on petrol imports despite increasing local refining capacity.
Dangote Industries has challenged the move in court, arguing that continued import approvals could discourage investments in domestic refining and undermine the objectives of the Petroleum Industry Act.
The refinery’s influence is also being reflected in broader economic indicators. Earlier this month, S&P Global Ratings cited increased refining capacity and stronger hydrocarbon exports among the reasons for Nigeria’s recent sovereign credit rating upgrade – the country’s first such upgrade in over a decade.
Beyond Nigeria, the refinery is increasingly being viewed as an important industrial project for Africa, especially as many countries on the continent continue to depend heavily on imported fuel products.
