Nigeria’s fuel market is in the midst of a high‑stakes disruption as the Dangote Petroleum Refinery continues to challenge traditional importers and the regulatory framework that has governed the downstream sector for decades. At the heart of the standoff are two competing business models and divergent visions for the future of fuel supply in the country, one built on domestic refining scale and cost leadership, and the other on long‑established import networks that have dominated the market, helped by government subsidies.

The Dangote Petroleum Refinery has radically altered the landscape since it began commercial operations. With a nameplate capacity of 650,000 barrels per day, it was conceived as a project to end Nigeria’s chronic dependence on imported refined products and to conserve foreign exchange otherwise spent on fuel imports. The refinery has since asserted its presence through multiple price reductions and direct distribution strategies that have put pressure on imported petrol suppliers and reshaped competition.

Domestic pricing shifts and market impact

Domestic pricing moves by the refinery have been headline‑making. In 2025, the refinery repeatedly cut its ex‑depot petrol price, at times driving gantry prices below those of imported alternatives. Analysts observed that these cuts were intended not only to ease the cost of fuel for consumers and transporters but also to shift market share toward locally refined products.

Industry sources say marketers have felt the impact of these pricing decisions, with some stating that at prevailing rates, importing makes little commercial sense. “It would stop imports now, definitely, since imports are higher than Dangote’s price,” Clement Isong, head of the Major Oil Marketers Association of Nigeria, said, summarising the pressure on import margins.

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Tensions came to a head in recent months when Dangote’s leadership publicly escalated the dispute with the Nigerian Midstream and Downstream Petroleum Regulatory Authority. Aliko Dangote accused the regulator of enabling fuel import practices that undermine the viability of domestic refining. He claimed that official data on domestic supply volumes were inaccurate and that continued prioritisation of imports jeopardised local industrialisation and energy security.

Dangote called for a corruption probe into the regulator’s leadership, alleging questionable conduct at the agency. The dispute underscores how far the season‑long competition has moved from mere pricing to questions of policy, governance and market fairness.

This confrontation with the regulator builds on earlier legal challenges. In July, Dangote Refinery dropped a lawsuit against both the downstream regulator and several fuel importers, including Nigeria National Petroleum Company Ltd (NNPC), over the way import licences were being handled. The litigation, which had drawn attention to the regulatory role in shaping fuel supply, was withdrawn, leaving unresolved debates about the balance between local refining support and import liberalisation.

Balancing imports, domestic output and policy challenges

The broader context is complicated by fluctuating regulatory policies. Nigeria at one point approved a 15 percent import duty on petrol and diesel to protect local refiners and encourage domestic production, only for that tariff to be shelved amid concerns about retail price spikes and holiday season supply pressures. This policy reversal illustrated how difficult it has been for authorities to reconcile support for local refining with consumer price sensitivity.

Despite Dangote’s rising output, imports have remained significant. Data from regulatory sources and industry reports indicate that domestic refineries, including Dangote’s facility, have supplied millions of litres of petrol daily, but not yet at the levels required to fully replace imports.

One recent fact sheet showed that the refinery’s output was averaging about 18 million litres per day, while national consumption was closer to 56.7 million litres, leaving nearly half of the demand met by imports. This shortfall highlights why marketers continue to bring in fuel even as a large local producer is active.

The business models at play are fundamentally different. Dangote’s model is built on high fixed capacity, integration with crude sourcing and domestic processing, enabling it to price petrol closer to cost and reduce reliance on foreign exchange for refined product purchases. Marketers historically have operated on import arbitrage,  buying refined products abroad, paying landing and distribution costs, and selling them at retail. That model depends on access to foreign exchange, favourable shipping economics and consistent regulatory support for licences. When Dangote’s pricing undercuts landed import costs, those margins evaporate, forcing importers to reconsider their strategies.

Costs and foreign exchange dynamics have been central to the debate. In October, the Central Bank of Nigeria released significant foreign exchange allocations to support fuel imports, underscoring how import activity still plays a major role in supply. The bank’s disbursement of US$1.25 billion in 2025 to fuel sector players was part of efforts to keep supply stable as Dangote’s ramp‑up and currency market reforms brought shifts in sourcing and pricing.

Critics of heavy reliance on imports have noted the strain that imported fuel places on Nigeria’s foreign exchange reserves and balance of payments. Reports suggest that the Dangote refinery has helped reduce import expenditures significantly, saving the country billions in foreign exchange outflows as domestic supply replaces some import volumes. This dynamic has made the refinery not only a market competitor but an economic stabiliser, a role that strengthens the argument for prioritising local refining capacity.

Nevertheless, importers and downstream associations have pushed back. Some industry groups warned that direct distribution by the refinery could disrupt existing distribution networks and threaten jobs across the retail and logistics segments of the fuel market. These stakeholders argue that a sudden shift away from imports could create supply gaps if domestic output falters or if infrastructure constraints arise. The conflict is about maintaining business continuity as much as it is about market share.

At the same time, data from October 2025 suggests a market transition. Dangote’s average daily contribution to petrol supply was reported at nearly 20 million litres per day in certain periods, while total national supply figures showed a reduction in reliance on imports compared with previous years. This reflects how scaling domestic refining alters the supply mix and could reduce vulnerability to global supply shocks and exchange rate pressures over time.

Market implications and future dynamics

The contest between Dangote and importers will shape Nigeria’s downstream sector in 2026 and beyond. The outcome carries implications for petrol pricing, foreign exchange use, market structure and the regulatory role in balancing consumer protection with industrial scaling. Nigeria’s fuel economy is in a moment of transition, neither fully import reliant nor yet fully domestically supplied. How policymakers, producers and importers negotiate this period will determine whether the country moves toward genuine refining self‑sufficiency or remains in a hybrid model of mixed supply. Until then, who will blink first?

Meiza Nigeria