The move by Dangote Petroleum Refinery to slash the price of diesel by N55 per litre has sent ripples through Nigeria’s downstream petroleum sector, leaving diesel importers in a precarious position and challenging Europe’s long-standing dominance in supplying petroleum products to Africa’s biggest oil producing country.
The move, which has been hailed as a game-changer for the Nigerian economy, has left traditional diesel importers scrambling to adapt to the new market reality.
Since it began diesel production in January 2024, the Dangote Refinery, Africa’s largest oil refinery located in the Lekki Free Zone near Lagos, has reduced the price of diesel more than three times, from an initial N1,700 per litre to the current rate, thus providing much-needed relief to manufacturers and consumers alike.
On Monday, the refinery announced a reduction in the ex-depot price of diesel from N595 to N540 per litre, citing improved production efficiency and the ability to source crude oil locally.
A blow to diesel importers
For diesel importers, the price reduction is a major setback. Many importers, who have relied on the lucrative diesel market for years, are now struggling to remain competitive.
The Dangote Refinery’s ability to offer diesel at a lower price has effectively undercut importers, who must contend with higher costs associated with shipping, foreign exchange fluctuations, and international market prices.
Industry experts warn that the price cut could lead to a significant shake-up in the sector. Smaller importers, in particular, may find it difficult to survive in the new market reality.
“This is a game-changer for the industry,” said Tunde Ojo, an independent oil marketer with Independents Petroleum Marketers Association of Nigeria. “Importers who cannot match Dangote’s prices will either have to exit the market or find new ways to stay afloat. The days of relying solely on diesel imports are numbered.”
Read also: Diesel importers in trouble as Dangote Refinery crashes price by ₦55/litre
Experts said diesel importers are now faced with tough decisions as some may attempt to negotiate better deals with international suppliers, while others may explore alternative markets or diversify their product offerings.
However, these strategies may not be enough to offset the impact of Dangote’s pricing power.
“Importers are in a very difficult position,” said Chidi Nwankwo, a petroleum industry consultant. “Dangote’s refinery has a significant cost advantage, and importers will need to rethink their business models if they want to survive. Some may have to shift their focus to other products or explore partnerships with local refiners.”
Disrupting Europe’s dominance
For decades, Europe has been a major supplier of refined petroleum products to Africa. Countries like the Netherlands, Belgium, and France have dominated the market, exporting diesel, gasoline, and other products to meet Africa’s growing demand.
However, the rise of the Dangote Refinery is challenging this status quo.
By producing refined products locally, the Dangote Refinery is cutting into Europe’s market share. The refinery’s strategic location in Lagos, a major port city, allows it to serve not only Nigeria but also other African countries and potentially export to global markets.
This shift is forcing European refiners to rethink their strategies, as they face increasing competition from an African giant.
Industry analysts predict that the Dangote Refinery could reduce Africa’s reliance on European imports by up to 50percent in the coming years.
This disruption is not just about economics; it also has geopolitical implications. As Africa becomes more self-sufficient in energy, it gains greater leverage in global trade negotiations and reduces its vulnerability to external shocks.
According to OPEC, the Dangote refinery has cut down Nigeria’s imports of petroleum products from Europe. According to experts, the Dangote refinery might end the decades-long gasoline trade from Europe to Africa, valued at $17 billion per year.
“The ongoing operational ramp-up efforts at Nigeria’s new Dangote refinery and its gasoline (petrol) exports to the international market will likely weigh further on the European gasoline market,” OPEC report said.
It added, “Continued gasoline production in Nigeria, a country that has relied heavily on imports to meet its domestic fuel needs in the past, will most likely continue to free up gasoline volumes in international markets which will call for new destinations and flow adjustments for the extra volumes going forward.”
Dangote to operate at full capacity in 30 days
The Dangote Petroleum Refinery, Africa’s largest, is set to reach its full production capacity of 650,000 barrels per day (bpd) within the next 30 days.
Edwin Devakumar, the vice president of the Dangote refinery said Africa’s largest refinery is set to reach its full production capacity of 650,000 barrels per day (bpd) within the next 30 days.
He stated that the facility began refining crude into diesel, naphtha, and jet fuel in January last year, with petrol production commencing in September.
“The refinery is currently running at 85 percent capacity, and we can reach 100 percent in 30 days,” Devakumar said.
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