.As stakeholders demand balance between public interest, profit by local refiners
SOPURUCHI ONWUKA, Editor
Nigeria’s renewed push to expand domestic oil refining is drawing strong interest from investors, but industry experts and sector leaders say the momentum also carries risks that could weigh on the broader economy if not carefully managed.
Analysts note that the surge in refining investments followed the deregulation and liberalization of the downstream petroleum sector, which removed price controls and created a more commercially driven market.
According to energy economists, the policy shift unlocked private capital and triggered a wave of refinery projects designed to tap into Nigeria’s large and previously underserved domestic fuel market.
However, they warn that the scale of planned capacity, now projected at over 3 million barrels per day, raises difficult questions about crude supply, export earnings and macroeconomic stability.
Several experts argue that while domestic refining has long been seen as essential for value addition, job creation and industrial growth, it also competes directly with crude oil exports, which remain Nigeria’s main source of foreign exchange.
Economists point out that oil and gas exports account for more than 80 percent of the country’s forex earnings, over 70 percent of total exports and more than 90 percent of balance of payments inflows.
In their view, diverting increasing volumes of crude to local refineries could significantly reduce dollar inflows, placing pressure on the naira and worsening inflation.
Market analysts further link these concerns to the government’s domestic crude supply obligation and the policy directing crude sales to local refiners in Naira.
Financial experts say that while these measures are intended to support refining capacity and stabilize domestic fuel supply, they also limit the ability of the Nigerian National Petroleum Company (NNPC) Limited to earn foreign exchange from international crude sales.
In an already tight forex environment, they warn that such constraints could deepen liquidity challenges in the currency market.
Projections from regulators have also intensified the debate. Officials at the Nigerian Upstream Petroleum Regulatory Commission have indicated that crude production could rise from about 1.75 million barrels per day to around 2.5 million barrels per day.
Yet industry analysts argue that even at that level, supply would still fall short of the feedstock required by existing and planned refineries by at least 500,000 barrels per day.
Energy consultants caution that this imbalance could force Nigeria to import crude oil to meet domestic refining demand, a scenario they describe as economically counterproductive for a major oil-producing nation.
Upstream operators have openly expressed reservations about the current policy direction. Representatives of international oil companies explain that much of their production is already tied to long-term global supply agreements structured at the point of final investment decision.
In their view, redirecting those volumes to domestic buyers would disrupt established contractual obligations and undermine investor confidence. Indigenous producers, according to industry insiders, face a different but equally pressing challenge.
Many financed asset acquisitions with dollar-denominated loans, and they argue that selling crude in Naira exposes them to exchange rate risks that could jeopardize their ability to meet debt obligations.
Despite these concerns, investment in refining infrastructure continues to accelerate. Industry observers point to the 650,000 barrels per day Dangote Refinery in Lekki as a central pillar of the new landscape, with expansion plans that could raise its capacity to about 1.4 million barrels per day.
They also highlight the role of state-owned facilities such as the Port Harcourt Refining Company, the Warri Refinery and the Kaduna Refinery, alongside a growing network of modular plants.
Operators like Aradel Holdings and Waltersmith Petroman have, according to company sources, committed to scaling up their refining capacities, while firms such as Azikel Group and Duport Midstream are advancing smaller projects aimed at serving local markets and monetizing stranded resources.
In addition, project developers have confirmed plans for new large-scale refineries, including a 200,000 barrels per day plant by BUA Group in Akwa Ibom and a proposed 500,000 barrels per day facility in Ondo State backed by an international consortium.
The Nigerian Content Development and Monitoring Board, through its leadership, has also emphasized that its partnership in new refinery projects is intended to support government policy, create jobs and deepen local value addition in the petroleum sector.
Proponents of the refining push, including industry leaders such as AA Holdings Chairman Austin Avuru, argue that the long-term benefits outweigh the risks.
He maintains that transforming Nigeria from a crude exporter into a producer and exporter of refined products could strengthen the economy, stimulate industrialization and improve the balance of payments over time.
In his view, refiners should be allowed to source crude commercially, while the market evolves toward a more efficient allocation of resources.
However, other stakeholders caution that the transition must be carefully balanced. Market commentators stress that private investment does not automatically translate into public revenue, noting that profits from privately owned refineries accrue to investors rather than the state.
They argue that policies which prioritize domestic refining at the expense of foreign exchange earnings could weaken government finances and limit resources available for public services and infrastructure.
Industry figures, including former Chairman of the Major Oil Marketers Association of Nigeria (MEMAN), Mr Tunji Oyebanji, warned that directing crude sales in naira reduces forex inflows and shifts economic pressure onto the broader population through currency depreciation and inflation.
In his assessment, the current policy framework risks favoring private refiners, who can secure crude supply under stable terms and sell refined products at global prices, while the wider economy absorbs the downside.
Across the sector, experts increasingly agree that a more balanced approach is needed. They recommend that domestic supply obligations should reflect commercial realities and operate within a willing buyer, willing seller framework that respects existing contracts while still encouraging local refining. Without such adjustments, they warn that upstream investment could slow even as downstream capacity expands.
What emerges from these perspectives is a shared recognition that Nigeria stands at a critical point in the evolution of its petroleum industry. The refining boom offers a pathway to greater self-sufficiency, industrial growth and reduced dependence on imported fuel. At the same time, industry experts caution that if policy missteps undermine foreign exchange earnings and fiscal stability, the gains could come at a high cost.
The challenge, they conclude, lies in aligning ambition with economic balance so that the benefits of local refining do not erode the foundations of the wider economy.
