- More needs to be done to boost domestic oil refining capacity
Some Nigerians may have been taken aback by the postponement of the implementation of the 15 percent import duty on petrol and diesel until the first quarter of 2026, coming shortly after an earlier approval by President Bola Ahmed Tinubu on October 21. Yet, there appears to be a pragmatic basis for the government’s decision to tarry awhile.
Indeed, while the decision may have generated disquiet in some quarters, the letter, requesting the deferment by the Executive Chairman of the Federal Inland Revenue Service, Dr Zacch Adedeji, and which was approved by the president, was strikingly shorn of ambiguity: The earlier measure “was conceived as a corrective policy tool to strengthen local refining capacity, stabilise downstream market prices, and promote competitive parity between imported and domestically produced fuels in line with the Renewed Hope Agenda for energy and fiscal sustainability.” However, a “thorough assessment of market conditions and the agreed strategic implementation roadmap…to allow for a smoother and more efficient rollout” … had made it necessary to put things on hold, albeit temporarily.
In other words: the market was neither ready, nor the government eager, to administer the tax without the right things being firmly in place.
To FIRS chairman Adedeji: “This adjustment will provide adequate time for stakeholders to complete alignment on technical templates, public communication frameworks, and import scheduling, thereby minimising disruption to the supply chain and ensuring that the reform achieves its intended stabilising impact.”
“The deferment,” he particularly noted, “would also create a window for government agencies to monitor local refining performance in the first quarter of 2026 and align the tariff’s rollout with verified production data and consumer price trends.”
Dangote Refinery, the main local crude processor, would naturally not agree that this deferment was necessary. Anthony Chiejina, spokesman for the Dangote Group, considers it “unpatriotic” that anyone would dare to criticise the 15 percent tariff designed to protect domestic industries from unfair competition and safeguard local production at this time.
He was just as unequivocal on the capacity issue: “the refinery now loads 45 million litres of PMS and 25 million litres of diesel daily, which exceeds Nigeria’s demand” – hence, no need for importation.
He had told Bloomberg, in November: “This significant production capacity not only guarantees local supply, but also enhances energy security and reduces dependence on imports.” The refinery has since requested the on-site team of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to collaborate in publishing the refinery’s daily output, perhaps to allay any doubts about the capacity of the local refiner.
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Interestingly, a month earlier, Farouk Ahmed, the Chief Executive Officer of NMDPRA, had put the contribution of Dangote Refinery at an average of 20 million litres as against the 50 million litres per day requirement of the local market.
According to the October fact sheet published by the regulator, the midstream and downstream petroleum sector remains hampered by low refinery utilisation. The country’s installed refining capacity, the document noted, stands at 1.125 million barrels per day with operational utilisation at 61.58 percent. Four private and modular refineries – Dangote, Aradel, Edo, and Waltersmith combined, it noted, refined 467,000 bpd. Dangote Refinery is said to have averaged 449,000bpd for the period.
The overall picture, according to the Business Insider Africa magazine, is that the country has remained a major importer: “Despite rising domestic output, imports continue to supplement supply, with reconciled data (August 2024 to September 2025) showing that imports from Oil Marketing Companies ranged from 24 – 44 million litres/day across the months.”
So much for the divergence of perspectives; we think the issues are not quite complicated or less straight-forward as they are often presented. It comes to the basic question of how much crude the country currently refines and how much is consumed, and the question of whether the former is sufficient to meet domestic requirements. NMDPRA, from all indications, appears to believe that the country is nowhere yet, in terms of the adequacy of local supply.
Yet, if there was ever any time that this disputation, which has lingered for decades and which has long remained at the heart of the nation’s fuel demand/supply conundrum, needed firm resolution, it is now. To the extent that we consider that aspect of the problem the easiest to solve, we expect the NMDPRA to immediately set up the infrastructure, assuming that it does not yet have it in place.
However, the bigger problem, by far, is the inadequacy of local refining. While there is no doubt that the country has recorded appreciable progress in the midstream and downstream sectors, the truth, however, is that the country still has a long way to go. Indeed, one of the highlights of the NMDPRA fact sheet is that some 47 Licences to Establish (refineries) with a cumulative capacity of 1.75 million barrels per day have been issued since 2000. And that is separate from the 31 Licences to Construct granted for facilities representing 1.228 million barrels per day of planned capacity of which only three are currently under active construction, with a total expected capacity of 47,000bpd, including Waltersmith’s Train 2 expansion of 5,000bpd.
No doubt, a lot of progress has been made. Dangote Refinery, and indeed a few modular refineries, are up and running. Even at that, more than four years after the Petroleum Industry Act, leading operators continue to hint at some lacunas requiring further fine-tuning. A particularly sticky issue that keeps popping up is the issue of crude supply to the local refiners. This is probably the best time, if any, for the government to address them permanently.
The challenge for the government is to ensure that the various factors impeding the optimal utilisation of the existing refineries are removed to enable the local refineries enjoy the full benefit of being wholly Nigerian entities.
To us, however, the biggest challenge by far is for the government to push for an early completion of those refineries under construction to boost the overall domestic refining capacity.
