Dangote refinery reduces forex pressure on Nigeria — Report

The Economist Intelligence Unit has said the operational ramp-up of the 650,000-barrel-per-day Dangote Petroleum Refinery and Petrochemicals is reducing pressure on Nigeria’s foreign exchange market by cutting the country’s dependence on imported refined petroleum products.

In its latest assessment on Nigeria’s fuel market and regulatory environment, the EIU stated that the refinery had fundamentally reshaped Nigeria’s downstream oil sector, which had long relied heavily on imported fuel despite the country being Africa’s largest crude oil producer, a statement by the Dangote Group said.

According to the report, the refinery met nearly 80 per cent of domestic petrol demand in April and produced enough volumes to satisfy local consumption requirements as operations approached full capacity.

The EIU described Nigeria’s downstream petroleum sector before the refinery as “long dysfunctional”, noting that the country had remained almost entirely dependent on costly imported fuel while producing nearly 1.5 million barrels of crude oil daily.

According to the report, the emergence of the refinery has reduced import dependence, improved domestic fuel availability and strengthened Nigeria’s balance of payments position through lower import demand and rising exports of refined petroleum products.

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

The research and analysis division of The Economist Group, London, added that the refinery’s attainment of full operational capacity and its planned expansion would further support Nigeria’s economic growth and foreign exchange earnings over the medium 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,” it added.

The EIU noted that the refinery’s expansion has coincided with major reforms in Nigeria’s downstream sector, including the removal of fuel subsidies and the introduction of market-driven pricing mechanisms.

The report, however, said the transition from a state-dominated fuel import structure to large-scale domestic refining has triggered resistance from interests linked to the old import regime.

The latest tensions emerged following the decision by the Nigerian Midstream and Downstream Petroleum Regulatory Authority to relax restrictions on petrol imports despite the refinery’s growing capacity to meet domestic demand.

Dangote Industries subsequently initiated legal action, arguing that continued import approvals undermine domestic refining investments and conflict with the objectives of the Petroleum Industry Act, which seeks to encourage local refining capacity and reduce import dependence.

The refinery’s growing impact is also being reflected 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 first in 14 years.

Beyond Nigeria, the refinery is increasingly being viewed by many as a strategic industrial asset for Africa, where many countries remain heavily dependent on imported fuel despite rising demand for transportation, manufacturing, and power generation, especially as Middle East tension disrupts global oil supply.