Public or Private Refinery in Nigeria: Something Less Than Nothing?

On May 22, 2023, the $20 billion Dangote refinery was inaugurated in Lagos with great fanfare. With a daily production capacity of 650,000 barrels, it was anticipated that local refining by the Dangote refinery would end Nigeria’s fuel importation, opaque fuel subsidy regime, fuel shortages, price hikes, and many other challenges associated with the downstream sector of Nigeria’s oil industry. Over one year after the inauguration and with the commencement of production by the Dangote refinery on September 15, 2024, challenges relating to fuel importation and price hikes have remained features of the downstream sector of the Nigerian oil economy.

Building a local refinery in Nigeria promises many opportunities for investors, the Nigerian government, and the general public, at least in theory. However, recent experience with the Dangote refinery in Nigeria tends to question the promises of local refining. This edition of the Nextier SPD Policy Weekly explains why Nigerians’ hope for cheaper refined products from Dangote’s refinery may be stillborn, at least in the short term.

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