By Ugo Inyama
Nigeria’s fuel economy runs on instability. Prices jump without warning. Supply appears and disappears. Profit comes not from efficiency, but from disruption. This is not system failure. It is system design.
For decades, Nigeria has lived a costly contradiction. It produces crude oil at scale, yet imports most of the fuel it uses. Value leaves cheap and returns expensive. Foreign exchange drains. Inflation rises. Public anger flares, then fades. The cycle continues.
This structure hardened over time. Refineries stopped working and stayed that way. Maintenance became a talking point. Subsidy grew into a fiscal burden. Scarcity became routine. Around this dysfunction, a system emerged that learned to profit from it.
Importers secure cargo. Depot owners control storage. Shipping firms handle movement. Banks finance transactions. Regulators manage approvals. Each step adds cost. Each delay creates leverage. The longer the chain, the higher the margin.
Complexity became business.
Then the Dangote Refinery changed the equation.
This is not about personality. It is about power. Two economic logics are now in conflict.
The first is production. Refine crude locally. Cut imports. Shorten the chain. Anchor supply in infrastructure. Keep value at home.
The second is intermediation. Stretch the chain. Control access. Profit from delay. Monetise scarcity.
For years, intermediation has dominated.
Dangote challenges that dominance.
Scale is the disruption. A refinery of this size compresses layers that once justified multiple actors. It reduces the number of hands between crude and consumer. It limits the points where value can be extracted.
Fewer steps. Fewer toll gates. Less opacity.
That is the threat.
The oil cartel is not a company. It is a network of incentives. It thrives on fragmentation. It benefits from confusion. It gains from timing and control.
In this system, delay is profit. Scarcity is leverage. Complexity is power.
When supply tightens, margins rise. When approvals slow, influence grows. What looks inefficient is often intentional.
A functioning refinery disrupts this model. It shortens distance. It exposes cost. It weakens those who profit from managing access instead of building assets.
The resistance is predictable.
The language is technical: monopoly risk, pricing power, market dominance. These concerns sound valid. In another setting, they would matter.
But Nigeria does not have a refining market to protect. It has an import habit to break.
Local refining is not the problem. It is the correction.
The real issue is control of value.
The Federal Government as the Arbiter
Government sits at the centre of this shift. Policy will decide the outcome.
Clear rules will accelerate change. Unclear rules will protect the status quo.
Support for local refining should go beyond statements. It should be visible in action. Crude supply routes should be reliable and transparent. Pricing should be predictable. Regulation must be rule-based, not negotiated through influence or informal networks.
Government should also align incentives with outcomes. Policies that encourage imports while promoting local refining create contradiction. Fiscal tools, access to credit, and infrastructure support should all reinforce domestic production. Consistency is critical.
Every delay sends a message. Every unclear policy creates risk. Markets respond. So do entrenched interests.
Nigeria has seen this pattern before. In ports, congestion creates profit but punishes businesses and citizens. In power, scarcity generates income. In foreign exchange, gaps invite arbitrage. Again and again, systems reward those who manage access to corridors of power rather than those who build capacity.
Fuel imports are one of the most expensive outcomes of this pattern.
Public debate often focuses on pump price. This is too narrow.
Refining shapes the wider economy. Petrochemicals support manufacturing. Fertiliser supports agriculture. Industrial inputs reduce costs across sectors. When refining is local, industries grow.
Skills deepen. Supply chains strengthen. Investment shifts toward production.
Value stays home.
Concerns about reliance on one refinery are valid. No system should depend on a single asset. But the answer is not to protect imports. The answer is to build more refineries.
Encourage more players. Expand capacity. Create competition within the country.
Competition should happen at home, not abroad.
The macroeconomic stakes are clear. Fuel imports drain foreign exchange. Currency pressure drives inflation. Inflation reduces purchasing power. Public funds are diverted to manage avoidable costs.
Local refining addresses these pressures at their source. It reduces imports. It keeps transactions within the economy. It strengthens the balance of payments. It reduces exposure to external shocks.
It also improves fiscal stability. Lower import bills ease pressure on government spending. Resources can be redirected toward infrastructure, health, and education. The broader economy benefits when fewer resources are used to sustain inefficiency.
Nigeria will still face global oil price cycles. But it will no longer outsource a critical part of its value chain.
This is not about one refinery. It is about direction.
Will Nigeria reward production or preserve intermediation?
Will it build capacity or sustain dependency?
Will it shorten value chains or protect them for rent?
The answers will define the economy.
Between Dangote and the oil cartel lies a deeper choice. One path builds. The other extracts.
One creates value for the economy. The other circulates it to the privileged few.
The outcome will shape more than fuel supply. It will determine whether Nigeria turns its resources into strength or continues to export potential and import cost.
The choice is clear.
The government’s continued response will show whether Nigeria is ready to act.
*Ugo Inyama writes from the African Digital Governance Centre, Manchester, UK
Ugo@africandgc.org
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