The Organisation of the Petroleum Exporting Countries (OPEC) has expressed optimism that the Dangote Petroleum Refinery, one of the largest refineries in the world, could play a significant role in lowering petrol prices in Nigeria. According to OPEC, the refinery, once fully operational, has the potential to stabilize the supply of petroleum products in the country, which could lead to more affordable fuel for Nigerians. However, officials at the refinery are urging the Federal Government to ensure that the facility receives adequate crude oil supply to meet its ramp-up goals.
The Dangote Refinery, based in Lekki, Lagos, is a $20 billion investment and has a refining capacity of 650,000 barrels per day. The refinery, which began operations in January 2024, has already shown positive impacts on the country’s fuel market by lowering the price of diesel and Premium Motor Spirit (PMS or petrol). As of recently, the refinery reduced the ex-depot price of PMS from N950 to N890 per liter, which has helped alleviate fuel scarcity and stabilized supply in the country.
OPEC’s February Monthly Oil Market Report highlighted that the Dangote refinery could assist in stabilizing the supply of petroleum products as it continues to ramp up production. The refinery’s potential to stabilize the supply chain is seen as vital, especially considering Nigeria’s history of fuel shortages and import dependency. OPEC also stated that with the country’s oil sector remaining central to its economy, the refinery’s full capacity will have a positive effect on the market.
The Dangote Refinery is currently running at a capacity of 550,000 barrels per day, with plans to reach its full capacity by March 2025. Davakumar Edwin, Vice President of the Dangote Group, disclosed that the refinery is on track to achieve full capacity soon. He emphasized that achieving full production would provide a much-needed boost to Nigeria’s oil industry, reducing the country’s reliance on imported refined products.
However, local crude oil supply remains a major issue for the refinery. While the refinery’s operations have the potential to transform the Nigerian oil market, officials have voiced concerns that the country’s current crude oil production is insufficient to meet the growing demands of its refineries. According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the Dangote refinery, along with other refineries, requires approximately 770,500 barrels of crude oil daily to maintain operations. However, the country’s allocation for local refineries, set at 450,000 barrels per day, falls short of this requirement.
In an effort to overcome this challenge, Dangote officials have turned to importing crude oil to supplement the local supply. The refinery has imported 12 million barrels of crude from the United States in recent months and is also building eight additional storage tanks to increase its crude oil storage capacity. These measures are seen as essential to ensure that the refinery’s ramp-up plans are not disrupted by local supply constraints.
A consultant familiar with the refinery’s operations, who wished to remain anonymous, shared that the situation could be resolved if the Federal Government adheres to the “naira-for-crude” deal. Under this arrangement, local refineries are to be supplied with crude oil by the Nigerian National Petroleum Company Limited (NNPCL) in exchange for naira payments. The consultant emphasized that OPEC’s positive outlook on the Dangote refinery was based on the assumption that the refinery would receive adequate local crude supplies.
“OPEC knows what it is saying; they must have done their research well before making these projections,” the consultant stated. “We all can see how the refinery crashed the price of diesel. It recently reduced the price of PMS and eliminated the year-long fuel queues in filling stations, especially during yuletide. Let the local actors do the right thing and stop playing games.”
Another source at the refinery echoed similar sentiments, noting that while petroleum product prices are influenced by various factors, sufficient local crude supply is crucial for both the availability and affordability of fuel. “Nobody fixes the price and that’s why it keeps changing,” the source explained. “However, enough local crude supply will aid affordability. That’s why we are calling on the Federal Government to ensure the naira-for-crude policy achieves its objectives.”
In addition to the concerns over local crude supply, the Crude Oil Refinery Owners Association of Nigeria (CORAN) has expressed support for OPEC’s positive view of the Dangote refinery. CORAN’s Publicity Secretary, Eche Idoko, pointed out that the larger the quantity of crude refined, the lower the cost of production. “In refining, the larger the quantity you refine, the cheaper the cost and the more the yield. Consequently, the better the margins,” Idoko explained.
Despite the challenges of local crude supply, there is a growing sense of optimism about the future of Nigeria’s refining industry. Idoko stressed that Nigeria should not face crude supply challenges, given the country’s vast oil reserves. “We have abundant provable reserves of sweet crude in the country, and with the recent progress made with the domestic crude supply obligation under the Petroleum Industry Act, we can expect a brighter prospect for domestic refining in Nigeria,” he added.
Meanwhile, OPEC has noted that inflation remains high in Nigeria, but there are signs of cooling due to the devaluation of the naira. OPEC’s report indicated that the Central Bank of Nigeria (CBN) may be nearing the end of its tightening cycle after several interest rate hikes in 2024. This, combined with easing price pressures, is expected to have a positive impact on Nigeria’s economic growth, which grew by 3.5 percent year-on-year in the third quarter of 2024.
The Nigerian government is also working to meet the crude oil production targets set by OPEC. Nigeria recently exceeded its OPEC quota, achieving an average daily output of 1.54 million barrels in January 2025, which is above the 1.5 million barrels per day target set by OPEC. Despite this, Nigeria has struggled to meet its OPEC quotas in recent years, largely due to challenges such as crude oil theft and pipeline vandalism.
Heineken Lokpobiri, Nigeria’s Minister of State for Petroleum Resources, has expressed confidence that Nigeria could achieve an oil production target of 3 million barrels per day in 2025.
