Nigeria has 37 billion barrels of crude oil, yet it spends over ₦8 trillion annually importing petrol, diesel, and kerosene. With local refineries barely working, the country relies on imports for 90% of its fuel, draining public funds and pushing up prices. While the Dangote Refinery is now operational and expected to boost local supply, red tape, crude shortages, and inefficiencies have slowed its full impact. Until domestic refining meets demand, fuel imports will continue to drive up inflation, weaken the naira, and make life harder for everyday Nigerians.
The High Cost of Importing Fuel
Nigeria’s four government-owned refineries, with a combined capacity of 445,000 barrels per day (bpd), barely function, running at less than 5% efficiency (NNPC, 2023). To make up for this, the country imports 40–50 million liters of petrol daily, mostly from Europe. This exposes consumers to two major problems:
- Rising Global Oil Prices: When crude hit $120 per barrel in 2022, petrol prices in Lagos skyrocketed by 300%, reaching ₦600/liter.
- Expensive Subsidies: Before subsidies were partially removed in 2023, Nigeria spent ₦4 trillion on fuel subsidies in 2022 more than the combined budgets for education and healthcare. After subsidy removal, petrol prices hit ₦900/liter, cutting into household incomes.
How Fuel Imports Fuel Inflation
The cost of fuel affects nearly everything, especially food prices and businesses. In 2024, diesel prices hit ₦1,500/liter, causing:
- Soaring Food Prices: The cost of tomatoes rose 400% in Kaduna as transport costs tripled.
- Business Closures: Over 20% of small businesses in Aba and Onitsha shut down in 2023 due to high generator fuel costs.
- Struggles for Transport Workers: Okada riders in Kano now spend 70% of their earnings on fuel, up from 40% in 2020.
How Fuel Imports Drain Foreign Exchange
In 2023, Nigeria spent $23.3 billion (36% of total foreign exchange spending) on refined fuel imports (CBN data). This puts pressure on the naira, which has fallen from ₦460/$1 in 2022 to ₦1,500/$1 in 2024. As the currency weakens, imports become even more expensive, creating a vicious cycle of rising fuel prices and forex shortages. Meanwhile, oil theft and declining crude production reduce Nigeria’s ability to earn dollars through exports.
Black Market and Fuel Smuggling Worsen the Crisis
To avoid high import costs, illegal refineries in the Niger Delta produce adulterated fuel, sold at ₦500/liter. This “kpo fire” fuel damages car engines and has led to over 2,000 explosion-related deaths since 2010 (NEMA). At the same time, fuel smuggling to neighboring countries drains 15% of Nigeria’s supply, worsening local shortages.
Dangote Refinery: A Solution Facing Challenges
The Dangote Refinery, with a capacity of 650,000 bpd, is expected to end fuel imports. However, challenges like securing enough crude oil and regulatory delays have slowed its full-scale operations. While the refinery promises long-term relief, immediate solutions are needed to shield Nigerians from rising fuel costs.
How Nigeria Can Fix Its Fuel Crisis
- Revamp Local Refineries: The Port Harcourt Refinery’s 2024 test-run must lead to full operations. Nigeria can learn from Indonesia’s Pertamina, which turned failing refineries profitable through public-private partnerships.
- Deregulation with Consumer Protection: The government should allow competition in the fuel market while creating price stabilization funds to help consumers during price hikes, as seen in India.
- Support Modular Refineries: Fast-track approval and crude access for small refiners like Niger Delta Exploration & Production (NDEP), which already produces 1,000 bpd of diesel.
- Use Subsidy Savings Wisely: With over ₦400 billion saved monthly from subsidy removal (World Bank), funds should be redirected into mass transit systems and renewable energy projects to reduce dependence on petrol.
Nigeria’s fuel crisis is mostly self-inflicted. inconsistent policies, and corruption have kept the country dependent on expensive fuel imports. The Dangote Refinery offers a potential breakthrough, but without fixing governance and regulatory failures, it may not fully deliver on its promise. Real solutions require prioritizing local refining over foreign imports and consumer welfare over business cartels.
