Market News

LAGOS – Nigeria’s petroleum market is entering a new phase in which the country is simultaneously earning hundreds of billions of naira exporting petrol and spending almost as much importing the same product, underscoring the complex transition from an import-dependent fuel market to one increasingly supplied by domestic refining.

According to a report by SBM Intelligence, Nigeria earned N998.5 billion ($752.7 million) from petrol exports in the first half of 2026, more than six times the value recorded a year earlier, as rising output from the Dangote Petroleum Refinery created growing volumes for both the domestic market and export destinations.

But the emergence of Nigeria as a petrol exporter has not ended its dependence on imports.

Data from the National Bureau of Statistics (NBS) showed that the country spent N952.15 billion importing petrol in Q2 2026 alone, compared with just N87.40 billion in Q1. The quarterly increase was almost 11-fold, even though the Q2 figure remained substantially below the corresponding level of a year earlier.

The result is an extraordinary contradiction: Nigeria exported N546.02 billion worth of petrol in Q2, while importing N952.15 billion worth of the same commodity.

Rather than indicating that domestic refining has failed to transform the market, the figures point to a sector still undergoing a rapid structural adjustment, with domestic production rising, imports remaining part of the supply chain and export opportunities expanding at the same time.

Dangote Refinery sits at the centre of this transformation.

The refinery’s increasing output has enabled Nigeria to move from being overwhelmingly dependent on imported petrol to becoming a significant exporter to regional and international markets. Reuters recently reported that the refinery has also become a major exporter of refined products, with its expansion materially reducing Nigeria’s gasoline import dependence.

In the first half of 2026, petrol exports reached N998.5 billion, with African markets accounting for more than 60 percent, or about N621.72 billion, of the total.

The export performance accelerated in the second quarter, when petrol exports rose to N546.02 billion, making PMS one of Nigeria’s major export commodities.

That development represents a striking reversal from the position only a few years ago, when Nigeria routinely spent trillions of naira importing petrol because domestic refineries were unable to meet national demand.

Yet the import figures show that the transition is far from complete.

NBS data showed that petrol imports accounted for 6.6 percent of Nigeria’s total imports of N14.42 trillion in Q2, making PMS the country’s largest imported commodity during the quarter. Despite the massive quarterly rebound, the Q2 import bill remained significantly below the level recorded in Q2 2025, pointing to a market in transition rather than a return to the previous scale of import dependence.

The volume picture is equally revealing.

NMDPRA data cited in recent reports showed that average petrol imports actually declined quarter-on-quarter from 11.23 million litres per day in Q1 to 9.23 million litres per day in Q2, even as the naira value of imports surged. This divergence suggests that movements in international prices, exchange rates and the composition of supplies played an important role in the sharp increase in import expenditure.

Meanwhile, domestic refining has continued to expand.

NMDPRA data showed that locally refined petrol supply rose strongly in early 2026, with domestic refineries supplying about 3.18 billion litres in Q1, compared with significantly lower volumes a year earlier.

But the emergence of a dominant domestic producer has introduced a new question into the market: how should competition and import access operate as local refining capacity expands?

That question has now moved decisively into the courtroom.

The Federal High Court in Abuja on September 28 ordered the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to continue granting and renewing petroleum-products import licences to Matrix Energy, AA Rano and AYM Shafa, provided the companies satisfy the relevant statutory and regulatory requirements.

Justice Inyang Ekwo held that the regulator’s refusal to issue or renew the licences amounted to non-compliance with the Petroleum Industry Act (PIA). The court also held that relevant provisions of the PIA and the Federal Competition and Consumer Protection Act require the regulator to promote competition and prevent abuse of dominant positions in the midstream and downstream petroleum sector.

The ruling is particularly significant because it comes amid an increasingly visible contest over the future structure of Nigeria’s petrol market.

The affected marketers have argued that the PIA does not prohibit petroleum-product imports and that eligible operators should be able to obtain licences where they meet the statutory requirements.

The dispute has also highlighted the scale of investment made by established oil marketers in storage, logistics and retail infrastructure. Matrix, AA Rano, and AYM Shafa have argued that their investments form part of the infrastructure required to maintain a competitive downstream market.

Dangote Refinery, however, has separately challenged the continued issuance of import licences, arguing that imports should not undermine domestic refining when local supply is available.

The competing positions expose one of the central tensions in Nigeria’s downstream transformation: how to encourage massive investment in domestic refining without closing the market to competition and alternative sources of supply.

The issue extends beyond petrol to gas and crude supply.

NMDPRA has targeted September 24, 2028 for the transition away from regulated domestic gas pricing towards a willing-buyer, willing-seller framework, subject to market and infrastructure conditions.

The planned transition reflects the broader objective of moving Nigeria’s gas market towards greater commercialisation. But the sector continues to face supply constraints, meaning that pricing reform alone may not resolve the challenges confronting domestic gas users.

The crude supply situation presents another layer of complexity.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that producers offered 182 million barrels of crude oil to domestic refiners between January and August 2026, exceeding the refiners’ stated requirement of 154.6 million barrels.

However, only 112 million barrels were actually transacted, leaving a gap of about 70 million barrels between crude offered and crude ultimately supplied.

The NUPRC has attributed the shortfall to factors including pricing, payment security, crude quality and delivery timing.

That gap is significant because the success of Nigeria’s refining revolution ultimately depends not only on refining capacity but also on reliable access to crude feedstock.

The country can build large refineries, but sustained utilisation requires a crude supply system capable of matching refinery requirements on commercially acceptable terms.

The developments therefore point to a petroleum sector undergoing perhaps its most consequential transformation in decades.

On one side, Nigeria is increasingly capable of producing enough refined petroleum products to generate exportable surpluses. On the other, imports remain commercially relevant, particularly when domestic supply, product specifications, pricing or logistics do not align with market demand.

The figures also demonstrate that the success of domestic refining should not be measured solely by whether petrol imports reach zero.

A more fundamental measure is whether Nigeria can progressively reduce its structural dependence on imported refined products while building a competitive refining and export industry capable of generating foreign exchange.

The N998.5 billion petrol export earnings provide evidence that this transformation is already producing a new revenue stream.

But the simultaneous N952.15 billion Q2 import bill demonstrates that the transition is incomplete.

The next phase will therefore depend heavily on the regulatory framework governing competition, crude supply, gas pricing, import licensing and domestic market access.

With the courts now weighing into the import-licensing debate and regulators working towards further market liberalisation, Nigeria’s downstream petroleum industry is moving into a period in which market structure may prove as important as refinery capacity.

The central challenge will be to ensure that the emergence of large-scale domestic refining translates into sustained supply security, competitive markets and lower exposure to external shocks, while allowing investors and marketers to operate within a clear and predictable regulatory framework.

For now, Nigeria has reached an unusual milestone: it is earning nearly N1 trillion exporting petrol while spending almost the same amount importing it.

That paradox captures both the scale of the transformation already underway—and the unfinished business of Nigeria’s downstream petroleum revolution.