LAGOS – The Centre for the Promotion of Private Enterprise (CPPE) has cautioned that the operations of the Dangote Refinery and other domestic facilities will not provide a total shield against global oil price volatility, citing a cost structure still tethered to international market dynamics. In a policy brief released this week, the think tank dismantled the widespread public assumption that local refining would automatically trigger significantly cheaper petroleum products, noting that the “economics of refining” dictate otherwise.
Despite the recent rollout of the federal government’s “Crude-for-Naira” initiative, the CPPE emphasized that the underlying valuation of feedstock remains strictly aligned with global benchmarks and denominated in US dollars. This exposure has been laid bare in recent days as geopolitical tensions in the Middle East sent Brent crude soaring past $100 per barrel. Consequently, the Dangote Refinery was forced to adjust its gantry prices for petrol to ₦1,175 per litre, marking the fourth such review in less than two weeks.
“Even crude supplied by local producers or the national oil company is priced using international crude oil benchmarks,” stated Dr. Muda Yusuf, Chief Executive Officer of the CPPE. “Additionally, domestic refineries also pay a premium of about $3–$6 per barrel in order to secure crude supply.”
The vulnerability of the domestic market is further compounded by logistics and financial premiums. According to recent industry reports, local refiners continue to pay international freight and insurance rates to transport Nigerian crude from terminals to their facilities. This cost structure means that while local refining eliminates the “landing cost” of imported finished products, the “starting cost” of the raw material remains at the mercy of the London and New York exchanges.
However, the CPPE maintained that the benefits of domestic refining extend beyond the pump price. The shift is expected to significantly bolster national energy security by reducing the risk of supply disruptions and conserving critical foreign exchange reserves. By refining locally, Nigeria can improve its balance of trade and insulate the economy from the chaotic shipping delays and demurrage charges that have historically plagued fuel imports.
To sustain this momentum, the Centre has called on the government to ensure a more supportive policy environment. The CPPE recommends a coordinated mix of trade and fiscal measures, including reliable crude supply arrangements and tariff protection, to encourage further investment. Dr. Yusuf argued that the priority must remain on strengthening distribution infrastructure and promoting export competitiveness to ensure that Nigeria’s refining revolution delivers long-term macroeconomic stability, even if it cannot fully override the dictates of the global commodity market.
