Nigeria must improve crude supply to make refining industry competitive — Dangote

Nigeria must improve crude supply to local refineries if its growing refining capacity is to develop into a sustainable industry, Chief Economist at Dangote Industries Limited, Dr Hassan Mahmood, has said.

Mahmood, who represented the President of Dangote Refinery, Alhaji Aliko Dangote, at the Nigeria Oil Refining Summit (NORS 2026) in Lagos, said building refineries was only the beginning of developing a competitive refining sector.

He said the country must address the fundamentals around crude supply, regulation, transportation, storage and product distribution for refineries to operate efficiently and compete in the market.

According to him, Nigeria has for years exported crude oil while importing refined petroleum products, but the expansion of domestic refining capacity is changing that situation.

He said recent data showed crude production had risen to about 1.7 million barrels per day as of June 2026, while crude receipts by domestic refineries reached about 683,000 barrels per day in August.

Mahmood said the next challenge was ensuring that refineries could consistently obtain the crude they need to operate.

“Crude is the primary raw material for refining. A refinery that is ready to buy crude on fair and workable terms should be able to obtain the appropriate crude reliably and without uncertainty,” he said.

He said this did not mean giving refineries subsidised crude or preferential treatment, but creating a predictable and transparent system that allows producers and refiners to operate on commercially workable terms.

Mahmood also called for a competitive downstream market where locally refined products and imports compete under clear and transparent rules.

He said domestic refineries should compete based on efficiency, product quality, reliability and price, rather than depending on government protection to survive.

“No refinery should survive simply because government protects it, and no domestic refinery should be disadvantaged by a market structure that makes imports more attractive than local production,” he said.

He said the objective should be to develop several efficient refineries rather than replace dependence on imported products with dependence on a single domestic operator.

Mahmood also stressed the need for stable and predictable regulations, noting that refining projects require billions of dollars in investment and are designed to operate for decades.

He said investors need clarity on issues including crude supply, product imports, taxation, foreign exchange and market access.

According to him, policy uncertainty increases investment risks and ultimately raises the cost of financing projects.

Beyond the refineries themselves, Mahmood said Nigeria must improve the infrastructure needed to move crude and petroleum products efficiently.

He identified pipelines, storage facilities, terminals, roads and distribution networks as critical to the success of the refining industry.

He said relying heavily on trucks to move millions of litres of petroleum products was costly and inefficient, adding that Nigeria needed modern pipelines, coastal distribution systems and adequate storage.

Mahmood said the country should also look beyond meeting domestic fuel demand and position its refining industry to serve other African markets.

He said Nigeria’s location gives it an opportunity to supply refined petroleum products to West and Central Africa while creating jobs, generating foreign exchange and supporting other industries.

He added that refining should also provide feedstock for petrochemicals, plastics, fertiliser, pharmaceuticals and other manufacturing activities.

Mahmood said energy security should be viewed as part of economic security because countries that depend heavily on imported fuel remain exposed to external supply disruptions.

He said domestic refining capacity would give Nigeria greater resilience, but energy security should not mean shutting the country off from international markets.

“Energy security means having enough domestic capacity, diversified supply sources, adequate strategic stock and efficient market mechanisms to withstand external shocks,” he said.

Mahmood said the experience of the Dangote Refinery had demonstrated both the opportunities and challenges of undertaking large-scale industrial investment in Nigeria.

He said one refinery alone could not create a refining industry, stressing the need for large, medium-sized and modular refineries, alongside producers, marketers, financiers, regulators and government.

He said private investors were willing to commit capital to the sector but needed an environment where contracts are respected, regulations are predictable and investments can operate efficiently.

Mahmood said if Nigeria gets these fundamentals right, refining can move beyond simply supplying fuel to become a major driver of industrialisation.

He said a strong refining industry could support petrochemicals and manufacturing, create direct and indirect jobs and position Nigeria as a major refining and petrochemical hub for Africa.