Table of Contents
The Dangote refinery said Monday it would prioritise Nigeria's domestic fuel market as the Middle East war drives global crude prices above $100 a barrel and petrol costs at Nigerian pumps hit record highs.
David Bird, the refinery's managing director, made the pledge at a press conference in Lagos. But he attached a condition: the commitment holds only as long as the Nigerian government and state oil company NNPC continue to support the facility's access to Nigerian crude.
"Provided we continue to get access to Nigerian crude with the support of the Nigerian government and NNPC, albeit at internationally benchmarked prices, we will continue to process that oil and serve the domestic market with priority," Bird said.
The refinery, owned by Africa's richest man Aliko Dangote and located on the outskirts of Lagos, has a nameplate capacity of 650,000 barrels per day. It is the largest single-train refinery in the world and has covered Nigeria's fuel needs since opening in 2024, ending decades of near-total dependence on imported petrol.
But the refinery is under strain. It currently receives about five crude cargoes a month from NNPC under the naira-for-crude policy, well short of the 13 cargoes it needs to sustain full domestic supply. To fill the gap, it has been sourcing crude on international markets at far higher prices. Nigerian crude grades are running $3 to $6 per barrel above the Brent benchmark. After adding freight costs of about $3.50 per barrel, crude lands in the refinery's tanks at between $88 and $91 per barrel.
Brent crude climbed above $100 a barrel Monday, up roughly 26% in recent weeks, after U.S. and Israeli strikes on Iran disrupted refinery capacity across the Middle East and rattled supply routes. Tension around the Strait of Hormuz, through which about 20% of the world's oil transits, has compounded the price surge. Global stock markets fell sharply on Monday as investors weighed the implications.
Fuel prices in Nigeria have already jumped about 20% in the space of a week. The refinery raised its gantry, or ex-depot, price for petrol to 1,175 naira per litre and diesel to 1,620 naira per litre on Monday. At the pump, prices in some parts of Nigeria have crossed 1,200 naira per litre. That compares with 830 naira per litre in Lagos just days ago and 195 naira at the start of 2023, before President Bola Tinubu abolished fuel subsidies.
Bird said the refinery could not guarantee there would be no further price increases. The facility is, he said, "fully exposed to the international commodity market." Any decision to stabilise prices, he added, would have to come from the government.
"That is the role of government if they want to intervene in the economy when it comes to the cost of energy," he said.
NNPC has begun moves to secure crude supply for the refinery through third-party international traders, according to industry sources, but officials cautioned that the arrangement is unlikely to immediately bring prices down.
Before the Dangote refinery opened, Nigeria imported almost all of its refined fuel and shortages were common. The refinery had changed that picture sharply, but the current crisis has exposed the limits of that buffer. Industry analysts have said that without local refining, Nigerian petrol prices could have risen as high as 1,500 naira per litre under current market conditions.
The refinery said it was absorbing part of the cost pressure, having voluntarily taken on about 20% of the total cost escalation to cushion Nigerian consumers from the full impact of the global shock.
