The giant refinery at the heart of Nigeria’s economy

Posted: March 03, 2026

Nigeria is Africa’s largest producer of crude, yet for more than two decades, it had almost no refining capacity. The result was a paradoxical state of affairs: a nation blessed with huge oil reserves found itself importing refined oil products on a massive scale.

That started to change in September 2024, when the first drops of gasoline emerged from the Dangote refinery. Located on the outskirts of Lagos, the $20-billion refinery reached its nameplate output capacity of 650,000 barrels per day last month—enough, representatives from the refinery claim, to supply all of Nigeria’s fuel needs and still leave almost half its production for export.

At face value, then, the Dangote refinery would seem to spell a definitive end to Nigeria’s high-export, higher-import era of energy. But energy self-sufficiency has been slow to dawn.

Nigeria’s idle refineries and expensive fuel subsidy

Nigeria wasn’t always devoid of refining capacity. The Nigerian National Petroleum Company (NNPC) owns four refineries, which have a combined nameplate capacity of 445,000 barrels per day—almost enough to satisfy domestic demand in its entirety, according to the U.S. Energy Information Administration.

Despite $18 billion and 20 years of maintenance, however, none of those refineries are currently operational. Their disrepair long forced the Nigerian government to import fuel, which it released to the market at a subsidized price. But that’s taken its toll on public finances. In 2022 alone, the subsidy cost the government the equivalent of $9.7 billion—over 2% of GDP—according to ODI Global.

When Bola Tinubu, the current president, came to power in 2023, he enacted sweeping reforms to improve Nigeria’s public finances. Those included abolishing the fuel subsidy, which led to an overnight tripling of pump prices, according to Reuters.

Every day Nigerians are highly exposed to pump prices, which determine not only the cost of transportation, but also the cost of power—upwards of 80% of households and businesses rely on gasoline or diesel generators.

Supply constraints and operational struggles

In theory, the Dangote refinery should fit naturally into Tinubu’s Nigeria: It can sell gasoline into a free market, and the tremendous quantity it’s producing can help bring down the price of fuel. In reality, while fuel prices are indeed decreasing, the modest fall may have more to do with a soft crude market than the Dangote refinery.

That’s because throughout 2025, the refinery was importing roughly half of its crude from the U.S., Brazil, Angola, Ghana and Equatorial Guinea. Speaking to C&EN, Ehireme Alexis Uddin, an economist at the University of London’s School of Oriental and African Studies, explained that although the refinery has a deal to buy crude from Nigeria’s state oil company, much of that output is being used to service debt from foreign lenders.

The result is that Nigeria is still intermittently importing refined products.

Oil production is recovering; a gas boom is coming

The availability of domestic oil looks likely to improve in the medium term because, after a steep fall during the 2010s, Nigeria’s crude output is growing again.

That’s due largely to the 2021 Petroleum Industry Act, but can also be attributed to improved security in the Niger Delta, where most Nigerian oil is produced. “One of the reasons we are doing 1.7 million barrels today is because, as a government, we've been able to put certain measures in place to curb pipeline vandalism and crude oil theft,” Heineken Lokpobiri, Minister of State for Petroleum Resources, told the in-house publication Upstream Gaze.

The NNPC, meanwhile, is aiming to raise CAPEX investment to $30 billion a year by 2030. That’s 150% of the 2025 amount, according to the Energy Industries Council’s Guilherme Martins, but, “in a scenario where the government continues to support the industry, it could be achieved.”

A good chunk of that investment is likely to go towards exploiting Nigeria’s considerable—and hitherto untapped—natural gas reserves. Shell, for instance, is in talks to invest $20 billion in developing the offshore gas fields of Bonga North and Bonga South.

More part-private refineries could be on their way

The Dangote refinery will take as much of these new supplies as it can get, especially given its plans to double its capacity to a world-leading 1.4 million barrels a day by 2028.

The country might one day produce even more than that—if the NNPC’s latest efforts to bring Nigeria’s state-owned refineries back online are successful. The NNPC is currently courting external companies, dangling a share of refinery ownership in exchange for operating them.

Talk of part-privatization is a noticeable change of tack by the NNPC. It is also a reflection of current realities. The NNPC’s CEO, Bayo Ojulari, recently conceded there was “no way” his organization could run the refineries profitably without private sector assistance, telling attendees at an energy summit, “we don’t have the capacity right now.”

Regardless of the fate of the NNPC refineries, Nigeria’s extra crude, growing gas output and the Dangote refinery should all help to repair the country’s economy by pushing down inflation, generating tax revenue for the government and potentially turning the country into a net exporter of energy.

But for Nigerians—60% of whom are now living in poverty—the most pressing question is how quickly improvements to the energy sector will be felt in their everyday lives.