The launch of billionaire Aliko Dangote’s $20 billion oil refinery in Lagos was meant to herald a new era for Nigeria’s oil sector, but it has sparked as many questions as celebrations. With a capacity to process 650,000 barrels of crude oil daily, the state-of-the-art facility promises efficiency and transparency in a sector long plagued by corruption and inefficiency. Yet, for most Nigerians, the success of the refinery boils down to two key questions: Will petrol become cheaper? And will fuel queues disappear?
The answers remain complex. The refinery’s ability to lower petrol costs hinges on international crude prices, which remain volatile. Meanwhile, the days of long, exhausting fuel queues may finally ease, though this depends partly on tackling entrenched corruption in the oil sector—a battle Dangote himself has described as taking on “a cartel stronger than the mafia.”
A Broken System
Nigeria, Africa’s largest oil producer, has long endured a paradox: despite vast reserves, it has exported crude oil while importing refined petrol, often at inflated costs. Successive governments spent billions subsidizing petrol to make it affordable, but these subsidies created loopholes for corruption. In 2022 alone, subsidies cost the government $10 billion—over 40% of total tax revenue. Some of this subsidized petrol was even smuggled into neighboring countries for profit.
Dangote’s refinery aims to change this dynamic by refining oil locally and selling fuel in naira, Nigeria’s currency, rather than dollars. This would reduce foreign currency demand and ease pressure on the naira, which has plummeted from 460 to over 1,600 per US dollar since May 2023. However, the price of crude oil in global markets will still influence domestic fuel prices, meaning Nigerians may not see significant cost savings at the pump.
Battling Legacy Issues
Despite its potential, the Dangote refinery faces significant hurdles. The Nigerian National Petroleum Company (NNPC), which owns a 7% stake in the project, struggles to supply the refinery with enough crude. Years of mismanagement, oil theft, and pre-sold oil deals have crippled NNPC’s ability to meet local demand. Meanwhile, disputes over pricing and supply agreements have pushed Dangote to import crude oil from Brazil—a surprising move for a refinery in an oil-rich nation.
Farouk Ahmed, head of Nigeria’s oil regulatory authority, has accused Dangote of negotiating unfair terms, likening his demands to wanting “a Lamborghini for the price of a Toyota.” Dangote has pushed back, citing the need for fair agreements to sustain operations, but the tension underscores the challenges of reforming Nigeria’s opaque oil sector.
Economic Impact and Public Frustration
President Bola Tinubu’s removal of fuel subsidies in 2023, combined with market-driven currency devaluation, has left Nigerians grappling with skyrocketing fuel prices and inflation. Petrol prices in Lagos recently rose from 858 naira ($0.52) to 1,025 naira per liter, marking the first time in three decades that Nigerians are paying market rates for fuel.
For many, this triple shock—higher fuel costs, a weakened naira, and sporadic supply shortages—has deepened economic hardship. “It’s like living in constant crisis mode,” lamented a Lagos resident. The stress of securing fuel, often needed to power homes and businesses in the absence of reliable electricity, adds to the daily struggle.
A Glimmer of Hope?
Despite the challenges, analysts see the Dangote refinery as a critical step toward a more transparent and competitive oil sector. By reducing reliance on imported fuel and addressing quality issues, the refinery could improve public health and vehicle performance.
Still, disputes between regulators, traders, and refinery officials continue to fuel public skepticism. “Everyone is a villain. There are no heroes here,” says Toyin Akinosho, editor of Africa Oil+Gas Report.
The journey ahead is uncertain, but for Nigeria—a nation long betrayed by its oil wealth—the hope for lasting reform lies in the ability of Dangote’s refinery to navigate entrenched interests and deliver on its promise. Whether this monumental project can rewrite Nigeria’s oil story remains to be seen.