Let me begin with a caveat: no economy is completely insulated from global geopolitical tensions. While the Dangote Refinery reduces import dependence, it cannot fully shield domestic fuel prices from international market shocks. The refinery has rightly been hailed as a milestone for Nigeria’s energy sector, a long-awaited shift from crude exporter to refined-products powerhouse. Yet a troubling contradiction remains: Nigeria’s own crude is reportedly passing through foreign middlemen before reaching domestic refineries. If this continues unchecked, it risks undermining the very purpose for which the refinery was built.
There is no gainsaying that the emergence of the Dangote Refinery has been widely hailed as a turning point for Nigeria’s energy sector, a long-awaited shift from crude exporter to refined-products powerhouse. Yet, beneath this promise lies a troubling contradiction: Nigeria’s own crude oil is reportedly being routed through foreign middlemen before reaching domestic refineries. If left unchecked, this model risks undermining the very foundation upon which these local refineries were built.
According to Ikenga Ugochinyere, chairman of the House of Representatives Committee on Petroleum Resources (Downstream), Nigerian crude is being sold to the Dangote Refinery and others via intermediaries based in London and Dubai. These middlemen, he alleges, add no real value yet impose a significant financial burden, up to $18 on every $100 barrel. In practical terms, this means an in-country refinery designed to optimise local resources is instead paying a premium for that country’s owned crude. This arrangement is not only inefficient; it is economically self-defeating.
Who exactly are these middlemen? Who sanctioned their involvement, and what purpose do they truly serve? Refining is a margin-sensitive business, where profitability hinges on the balance between crude input costs and the price of refined products. The inevitable outcome is higher production costs, which ultimately translate into increased fuel prices for consumers. Nigerians are already struggling with petrol prices exceeding ₦1,200 per litre, further strained by global oil price shocks driven by geopolitical tensions. Imposing additional, unnecessary intermediary costs only worsens this burden.
More critically, this model threatens the refinery’s operational stability. A 650,000-barrel-per-day facility requires a steady and competitively priced crude supply to function optimally. If supply is constrained or made prohibitively expensive, the refinery risks operating below capacity. This could trigger fuel shortages, increased import dependence, and renewed pressure on Nigeria’s energy security. The broader economic implications are equally significant. One of the refinery’s key promises is reducing fuel imports and conserving foreign exchange. For decades, Nigeria has spent billions importing refined products despite being a major crude producer. A functional domestic refining system offers a path to reverse this trend, stabilise the naira, and improve the balance of payments.
This flawed approach risks discouraging similar large-scale investments. The refinery was meant to spur growth across petrochemicals, refining, and manufacturing, but persistent structural inefficiencies could lead investors to judge the risks as outweighing the returns. In doing so, Nigeria may forfeit a rare chance to develop a self-sustaining industrial base built on its natural resources.
There is also the danger of reversing the emerging benefits of hosting Africa’s largest refinery. Early gains such as improved fuel availability and reduced import dependence could quickly erode if the refinery cannot operate efficiently. Instead of strengthening Nigeria’s position in the global energy market, the refinery could be constrained by inefficiencies that limit its competitiveness. This arrangement distorts the supply chain, creates opportunities for arbitrage, and weakens regulatory oversight. It also reinforces the perception that entrenched interests continue to dominate the sector.
The federal government cannot afford to turn a blind eye. Ensuring direct crude supply to domestic refineries must be treated as a national priority. The Dangote Refinery is more than a private enterprise; it is central to Nigeria’s economic future. At a minimum, removing this bottleneck is critical for achieving energy security, strengthening the economy, and fully realising the potential of Nigeria’s oil wealth.
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Sola Oni, an integrated communications strategist, Chartered Stockbroker and Commodities Broker and Capital market registrar, is the Chief Executive Officer, Sofunix Investment and Communications. You can reach him at onisola2000@yahoo.com
