Nigeria’s giant Dangote refinery was supposed to help shield Africa’s top oil producer from the fuel crises that have repeatedly rattled its economy. Instead, Nigerians are paying the highest petrol prices in the country’s history.
Despite the refinery’s full start-up earlier this year, fuel prices have surged around 65% since the outbreak of the Iran conflict at the end of February, according to Reuters and industry data, making the increase the sharpest among major African economies. The jump has pushed pump prices in Lagos and Abuja to around 1,400 naira per litre, squeezing households and businesses already grappling with high living costs.
The 650,000-barrels-per-day Dangote Petroleum Refinery, owned by billionaire industrialist Aliko Dangote, was designed to transform Nigeria from a chronic importer of refined fuel into a regional refining hub. It has already boosted supplies at home and expanded exports across Africa. But the refinery has not insulated the country from the global energy shock unleashed by the conflict in the Middle East.
At the heart of the problem is crude supply.
Although Nigeria pumps roughly 1.5 million barrels of crude a day, much of that output is tied up in oil-backed loans and pre-export financing deals involving the state oil company, Nigerian National Petroleum Company Limited, traders and international oil firms. That has left Dangote struggling to secure enough domestic crude and forced it to import more expensive barrels from abroad.
Dangote’s managing director, David Bird, said the refinery can source only about five crude cargoes a month locally, well below the 13 to 15 cargoes it requires to run optimally. In practice, that means a refinery built to reduce Nigeria’s exposure to imported fuel is now itself exposed to imported crude at a time when global prices have surged.
The conflict has effectively choked commercial shipping through the Strait of Hormuz, a route for roughly one-fifth of global energy supplies, helping to push Brent crude above $100 a barrel. That has fed directly into fuel pricing across import-dependent markets and strained governments trying to contain inflation.
In Nigeria, the impact has been especially severe because fuel subsidies — long used to cushion consumers from international oil swings — were scrapped by President Bola Tinubu when he took office in 2023.
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That reform won praise from investors and lenders, but it also left motorists and businesses fully exposed to market pricing.
For ordinary Nigerians, the consequences have been immediate.
Transport fares have risen sharply, food sellers say fish and chicken prices have doubled, and ride-hailing drivers in Lagos have staged protests. The country’s weak electricity grid has amplified the pain, since many homes and firms depend on petrol and diesel generators to keep the lights on.
Analysts say the crisis has also exposed a broader vulnerability: Nigeria has no official strategic fuel reserve.
“A strategic reserve would have shielded Nigeria somewhat,” Reuters quoted Control Risks analyst Mikolaj Judson as saying, pointing to the absence of a buffer against sudden global supply disruptions.
Government officials have so far resisted calls for direct intervention in pump prices. Finance Minister Wale Edun said authorities would not interfere with what he called an “orderly market pricing system,” preferring instead to focus on support measures to help people adapt. In Oyo State, authorities have approved a temporary transport allowance for civil servants.
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Nigeria’s record-high gasoline prices highlight a deeper structural problem in Africa’s largest oil producer: producing crude oil is not the same as being insulated from global fuel shocks. The start-up of the 650,000 barrels-per-day Dangote Petroleum Refinery was expected to reduce Nigeria’s long-standing dependence on imported refined fuel and help stabilize supply. But the refinery still relies heavily on crude feedstock priced at international market rates, and Reuters reported that it has been forced to import a large share of the crude it needs because domestic supply remains constrained.
At the centre of the problem is Nigeria’s upstream financing structure. A significant portion of the country’s crude production is tied up in oil-backed loans, forward sales and joint-venture obligations, limiting how much can be freely supplied to local refiners such as Dangote. Reuters reported that Dangote can source only about five crude cargoes a month locally, well below the 13 to 15 cargoes it needs to run efficiently, forcing it to buy more expensive imported barrels instead. That leaves domestic fuel pricing exposed to the same geopolitical and freight-related pressures affecting the global oil market.
The timing has made the impact worse. Since the outbreak of war involving Iran, global oil and shipping markets have been severely disrupted, with the Strait of Hormuz effectively closed to commercial shipping in Reuters’ reporting and crude prices surging above US$100 per barrel. That has sharply increased feedstock and logistics costs for refiners globally, including Dangote, and helped push up wholesale and retail gasoline prices in Nigeria. Reuters reported pump prices have risen about 65 percent, with consumers paying around 1,400 naira per litre in Lagos and Abuja, the highest levels ever recorded in the country.
The crisis also exposes Nigeria’s weak fuel security architecture. Despite being a major oil producer, the country has no formal strategic fuel reserve, leaving it with little buffer when international supply routes are disrupted or prices spike. Analysts say that without reserve stocks, flexible crude allocation and a more reliable domestic supply chain, even a refinery as large as Dangote cannot fully protect the economy from imported inflation.
For Nigeria, the broader lesson is that refining capacity alone does not guarantee cheaper fuel. What matters just as much is how crude is allocated, how the downstream market is priced, and whether the country has enough resilience to absorb external shocks. The current price surge is therefore not only a refinery story — it is also a test of Nigeria’s wider energy reform model after the removal of fuel subsidies.
