Despite being Africa’s largest oil producer, Nigeria has long found itself in a paradox: it exports crude oil and imports refined fuel at a premium. For decades, this contradiction has not only drained public finances but also subjected the country to external shocks, price volatility, and periodic scarcity. As Nigeria navigates a post-subsidy economy amid rising inflation and currency instability, the debate over whether local refining or continued fuel imports will ultimately solve its energy crisis is more urgent than ever.
The Historical Burden of Imports
Nigeria’s fuel importation legacy dates back to the 1980s when its state-owned refineries began to decline due to poor maintenance, sabotage, and mismanagement. By 2010, the country had become almost entirely dependent on imports for its refined petroleum products. The situation worsened as consumption grew. According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the country imported over 20 billion litres of petrol in 2022 alone, spending more than $23 billion.
Subsidies formed a core part of this import-driven model. In 2022, the federal government spent ₦4.39 trillion subsidizing petrol, more than what was allocated to health and education combined. While intended to cushion consumers from high pump prices, the subsidy regime proved economically unsustainable and rife with corruption.
The removal of fuel subsidies in May 2023 marked a turning point. While the move was hailed as fiscally responsible, it unleashed a sharp rise in fuel prices—over 200% in some areas—and triggered a surge in inflation. The country’s inflation rate climbed to 33.69% by April 2025, according to the National Bureau of Statistics (NBS), largely driven by energy and transport costs.
Dangote Refinery and the Promise of Local Refining
The 650,000-barrels-per-day Dangote Refinery in Lagos, which began producing diesel and aviation fuel in January 2024 and petrol in September 2024, has changed the landscape. Developed at a cost of $20 billion, it is now the largest single-train refinery in the world and has already begun supplying local marketers.
Aliko Dangote, the refinery’s chairman, recently claimed the facility has brought down diesel prices by over 45% in one year, cutting them from over ₦1,600 per litre to around ₦1100 by May 2025. Jet fuel and LPG prices have also declined significantly.
The refinery, which aims to meet 100% of Nigeria’s fuel needs, provides a strategic opportunity to reverse decades of dependence on imports. But there are constraints. In May and June 2025, the refinery still relied heavily on imported crude, particularly U.S. WTI Midland grade, due to inadequate domestic supply. Bloomberg data shows U.S. crude accounted for nearly one-third of its feedstock so far in 2025.
This highlights a critical bottleneck: Nigeria’s crude oil production. Despite having an OPEC quota of 1.5 million barrels per day, actual output hovered around 1.28 million barrels per day in April 2025. Oil theft, pipeline vandalism, and regulatory delays continue to impede supply. Without consistent feedstock from local fields, even the best-equipped refinery cannot operate at full capacity.
What Consumers Need: Stability, Affordability, Availability
For the average Nigerian, the most pressing issues are fuel availability and affordability. Import dependency exposes consumers to global price shocks and forex volatility. In contrast, domestic refining, if efficiently managed, can offer more stable and predictable pricing.
Take the example of diesel. Dangote’s domestic refining enabled marketers to reduce retail diesel prices from over ₦1,700 per litre in early 2024 to under ₦1100 by mid-2025. That’s a direct consumer benefit. However, achieving similar outcomes for petrol depends on securing consistent crude supply, transparent pricing, and competition among local refiners.
Additionally, building out more refineries beyond Dangote is crucial. The 200,000-bpd BUA Refinery in Akwa Ibom and the rehabilitation of NNPC’s Port Harcourt and Warri refineries could further shift the tide. According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), a full transition to domestic refining could save Nigeria over $10 billion annually on fuel imports and forex pressures.
A Path Forward
The answer to Nigeria’s fuel crisis lies not in an either-or scenario, but in a phased and strategic shift toward local refining. Imports may still be necessary in the short term, especially for bridging supply gaps. But long-term stability, affordability, and energy security depend on boosting domestic refining capacity, ensuring a reliable crude supply, and enforcing transparent market practices.
For now, Dangote Refinery is a major leap in the right direction. But to truly solve Nigeria’s fuel crisis, it must be part of a broader structural transformation, one that prioritizes infrastructure, domestic production, and a consumer-first energy policy.