Ending Petrol Importation: Nigeria’s Path to Energy Independence and Economic Stability
By Ikenna Omeje
For years, petrol importation has been a heavy burden for Nigeria, costing the nation trillions annually. On his first day in office, President Bola Tinubu announced the removal of petrol subsidies on May 29, 2023, a move that quickly led to higher fuel prices and increased transportation and food costs.
Just a week before this announcement, former President Muhammadu Buhari inaugurated the 650,000 barrels-per-day Dangote Refinery in Ibeju-Lekki, Lagos. This $20 billion refinery, touted as the largest single-train refinery and the seventh-largest globally, sparked high expectations among Nigerians.
Many citizens believed that with the refinery’s operation, petrol prices would drop, shortages would end, and imports would become unnecessary. However, Nigeria continues to import petrol, as the Dangote Refinery has not yet met domestic demand. According to a report from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the refinery supplied only 148 million liters of petrol between September 15 and October 5, short of the expected 575 million liters.
In September, the Federal Government announced that the refinery would supply 25 million liters of petrol daily, with a target of 35 million liters per day from October. After meeting with President Tinubu in Abuja, Dangote Group Chairman Aliko Dangote urged petroleum marketers, including the Nigerian National Petroleum Company Limited (NNPCL), to source petrol directly from his refinery to meet local demand.
Dangote explained that while his refinery can produce over 30 million liters daily at full capacity and currently holds a 500-million-liter reserve, he is not responsible for retail distribution. He stated, “Well, on the streets, one thing you have to understand is that we are producers. I have a refinery. I’m not in the business of retail. If I’m in the business of retail, then you hold me responsible.”
He continued, “I am expecting either NNPC or the marketers to stop importing; they should come and pick because we have what they need. And as they move, I will be pumping.
“I don’t know whether you understand what it takes to keep a billion liters inside our tank. It’s costing me money every day. If I can collect the naira, I can charge somebody 32% in interest. So right now, that’s what I’m losing. And you are talking about 500 million. We don’t print money. But the issue is that if they come and collect, you will not see any queues in the filling stations,” he added.
Ending Importation Will Curb Corruption – Expert
Kelvin Emmanuel, Co-founder and CEO of Dairy Hills and an energy expert, argued that the narrative around continued petrol importation due to Dangote’s alleged inability to meet demand is misleading. He asserted that halting petrol imports could curb longstanding corruption in the sector, including inflated landing costs and manipulated daily consumption numbers.
“When I said here that the refinery has more than 400 million liters of PMS stored in tanks in Lagos (that has been refined), some people said I didn’t know what I was talking about,” Emmanuel said on X.
“Because propaganda has led some to spread misinformation, claiming ‘the reason we are importing is because the refinery is unable to meet our capacity.’
“Meanwhile, the $250,000 per 10,000 metric tonne racket will die, the fraudulent landing price and daily consumption numbers will die, and the offshore blending of off-spec PMS with crude oil cargoes used in swap arrangements will die a natural death. If Mr. President chooses to act accordingly, the SOE is an albatross on the neck of his presidency,” he added.
Emmanuel acknowledged a decline in petrol imports, stating that scheduled deliveries for October are down 68.7 percent from September. He suggested that supporting domestic refineries like Dangote’s would enhance Nigeria’s energy security and foreign exchange markets.
“I honestly think that for the crack spread the Dangote Refinery gets from refining sweet crude with low sulfur levels, it may pay a commercial refiner better to export PMS and maximize the premiums from offering EuroV 95-97 RON fuel to international markets, with sulfur levels at 10 parts per million or lower.
“Although I acknowledge that imported PMS has dropped from 1 billion liters to a third of that volume from last month, it’s important for the Nigerian Government to realize that supplying the market with a superior grade of PMS—unlike the sub-standard off-spec PMS blended with naphtha condensates offshore—is your domestic refiner bending over backwards to help with energy security and foreign exchange markets,” he said.
In his view, the government must end offshore blending contracts and integrate the downstream sector with domestic refiners. He further recommended increasing crude feedstock to domestic refineries and enforcing the Petroleum Industry Act (PIA) for quality standards on any imported petrol.
These measures, Emmanuel believes, are critical steps toward an independent, corruption-free petroleum sector in Nigeria.
Market Forces
President Tinubu emphasized on Tuesday that market dynamics should drive profit and loss in the oil sector, advocating for energy security while supporting stakeholders like Dangote.
During a meeting with the Implementation Committee on Naira-based sales of crude oil and refined products, Tinubu encouraged resolving any initial challenges, noting that using the Naira is intended to overcome exchange rate barriers.
He called on industry players, including NNPCL and the Dangote Refinery, to contribute to economic growth and improve Nigerians’ quality of life.
Related Posts
“The market must determine what we are doing. Once you allow the market to determine the profit and loss, independent marketers and the government side can meet on the worksheet. I want the issues resolved without future waste of time,’’ Tinubu stated, as quoted by Bayo Onanuga, his Special Adviser on Information and Strategy.
“We can have energy security, and the motivation for Alhaji Aliko Dangote will not be defeated. It will be more predictable on a medium and long-term basis,’’ he added.
Tinubu also urged stakeholders to focus on domestic production of petrol and other petroleum products to reduce reliance on imports, allowing foreign exchange to be redirected toward developing the real sector.
He suggested utilizing Afreximbank as a settlement bank to support Naira-based transactions for crude and refined products, which Afreximbank has agreed to assist with.
“Whatever solution we proffer in crude oil and refined products sales in Naira should not take us back to our experience in the last 40 years,” Tinubu emphasized, noting that adjustments in costs and revenue are possible without returning to outdated methods.
Federal Inland Revenue Service Chairman Zach Adedeji, who leads the technical committee, expressed optimism about ending refined product imports once domestic production meets local demand.
“The vision of Mr President is to turn Nigeria into a hub for refined products to export to the world,” Adedeji said.
Minister of Finance and Coordinating Minister of the Economy Wale Edun reiterated that the administration’s policy of selling crude in Naira remains firm, adding that the government would abstain from setting exchange rates for the oil sector.
Related Posts
Meanwhile, oil dealers under the aegis of the Petroleum Retail Outlet Owners Association of Nigeria and their counterparts in the Independent Petroleum Marketers Association of Nigeria have again written to the Dangote Refinery expressing their willingness to buy petrol from the refinery.
According to Punch, the oil marketers had approached the refinery a couple of times to express their interest in lifting refined products from the plant.
