A case against petrol importation

Despite increased domestic refining capacity (primarily led by Dangote Refinery), data on petrol importation has been staggering and deeply worrisome. In 2024, petrol import costs surged to N15.42 trillion, more than doubling the previous year’s figure of N7.51 trillion. Unfortunately, there isn’t enough appreciation of the cataclysmic effects of continued petrol importation, especially from an administration focused on driving reforms.

The harsh reality is that petrol importation triggers a cycle of economic decline which typically begins with pressure on our foreign exchange reserves, ultimately leading to currency depreciation and inflation. Therefore, expanding our local refining capacity and reducing dependence on imported petrol amid ongoing reforms might be the quickest route to achieving price and macroeconomic stability.

Beyond derailing the current administration’s market reforms, the continuous importation of petrol violates a cardinal provision of the Petroleum Industry Act (PIA). Section 317 (8 and 9) of the PIA suggests that the authority “may apply backward integration policy in the downstream petroleum sector to encourage investment in local refining.”

In other words, violating this provision will not only discourage investment but will disrupt a local industrialisation process that could diversify the economy and boost job creation.

Even more concerning is that pursuant to section 317 (8), the regulator is restrained from issuing petrol import licenses except where there is evidence that local refineries cannot meet consumer demand. This is where the situation becomes questionable. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) claims, without sufficient empirical evidence, that daily consumption of petrol hovers around 50 million litres, and that total local refining capacity is unable to meet 50% of this demand.

However, we know that Dangote Refinery currently processes about 500,000 barrels of crude daily. We also know that according to the Nigerian National Petroleum Company Limited (NNPCL), the Warri refinery is operating at 60% capacity, averaging about 75,000 barrels per day, while the Port Harcourt refinery, at 70% capacity, is refining about 42,000 barrels daily.

That means the combined refining capacity is roughly 617,000 barrels. Hence, the total daily production capacity should amount to a little over 46 million litres (based on the global benchmark where a barrel of crude oil typically produces about 75 litres of Premium Motor Spirit).

How, then, did the NNPCL arrive at the conclusion that less than 25 million litres are produced daily by local refineries? Could it be that despite the media attention, the Warri and Port Harcourt refineries aren’t operating as previously claimed? Whatever the true picture, it is clear that the evidence upon which the NMDPRA continues to issue petrol importing licenses is grossly misleading.

Another justification for the continued importation of petrol is that the NNPCL, with support from the Federal Competition and Consumer Protection Commission (FCCPC), is protecting Nigeria from a potential monopoly. But this argument crumbles under the slightest scrutiny. The most effective means of preventing a “Dangote monopoly” is to encourage other local refineries, including the four refineries owned by the NNPCL. Expecting a local refinery that has recently invested $20 billion to compete in the same market with petrol importers isn’t fostering competition—it’s sabotage!

Additionally, regulatory templates exist from energy markets in Europe (specifically France) and the United States, where certain oligopolies have been effectively prevented from predatory pricing.

A similar approach has been adopted in our telecommunications market where major operators—until the impact of currency devaluation—maintained significant profit margins despite price caps. Therefore, sufficient regulatory tools exist for the regulator to intervene if there is evidence of parasitic price gouging by Dangote Refinery. However, we are getting ahead of ourselves because currently, a monopoly doesn’t exist.

Finally, it is curious that while domestic refining capacity is increasing, petrol imports are also rising. Data on fuel importation last month showed that aside from the N930 billion bill in February, oil marketers licensed by the NMDPRA imported products worth N5.5 trillion between October 2024 and January this year.

Similarly, while crude production has significantly increased, the supply of feedstocks to local refineries has plummeted. In fact, a report by The Cable newspaper stated that “the NNPC reportedly told the refineries it has forward sold its crude and would discontinue its naira for crude deal with Dangote refinery and other local refineries.”

This decision also disregards the PIA that stipulates a statutory daily allocation of crude to local refineries—a requirement that the NNPCL has struggled to meet.

Sadly, as several countries worldwide are pushing to stimulate local manufacturing and attract manufacturers to their economies, there is a lack of urgency and what appears to be wilful negligence that may stifle arguably the most important local manufacturing concern in our economy today. The alternative to a 650,000-barrel capacity refinery creating thousands of jobs, saving scarce forex resources, and attracting significant foreign exchange cannot be petrol importation.

.Adio, a seasoned media strategist, reputation management consultant, and CEO, Adio Strategy and Communications, writes from Lagos