Democratic Socialist Movement

For Struggle, Solidarity and Socialism in Nigeria

By - DSM

Dangote Refinery: Can it resolve Nigeria’s fuel and forex crises?


The brutal mindless removal of petrol subsidy by President Bola Tinubu on his first day as president symbolized a new phase of attacks on the living conditions of the working people and the poor in an attempt to get out of the deep crisis Nigerian capitalism is in. This was followed up by total devaluation of the Nigerian currency, naira, otherwise called unification of foreign exchange. This has led to spiraling inflation that seems to have been out of control. It has subsequently led to unmitigated suffering and hardship for majority of Nigerians, especially the working people, whose income could hardly meet their basic needs, even before the emergence of Bola Tinubu as President.

By Kola Ibrahim

However, in search of the way out of the cost-of-living crisis precipitated by the removal of petrol subsidy, many suggestions have been made as a way of bypassing the suffering accentuated by the subsidy removal. One of these suggestions is the need for local production of fuel, which some believe will lead to reduced cost of production and thus reduced prices of fuel. This suggestion seems simply logical given the fact that Nigeria, as one of the leading world exporters of crude oil, has been unable to produce its local fuel need, and has to rely on importing processed fossil fuel. This has meant the country using its meagre resources to subsidize fuel importation. It has also contributed to a fall in the naira value.

Massive government support

It is within this scenario that the Dangote Oil Refinery comes in. The refinery project, which was conceived and started in 2013, did not produce fuel for Nigeria for 11 years. Only at the beginning of April 2024 was it reported that some diesel had been refined. Yet, this is a project that has cost Nigeria billions of dollars in state subsidies. In 2021, the Nigerian government, through the Central Bank of Nigeria (CBN), provided financial support worth N125 billion to Dangote refineries (CBN, 22 May, 2023) that was then worth over $300 million. Subsequently, the state owned oil corporation, Nigerian National Petroleum Corporation (NNPC), provided a financing support worth over $2.7 billion to Dangote Refineries; which was subsequently turned to a 20% stake in Dangote refineries (The Guardian, 26 August, 2021). Interestingly, the NNPC secured the money from international loan: euphemism for borrowing on behalf of Dangote.


These state financial supports came at a time when Dangote refineries was facing serious financial crisis. The cost of building the refineries had increased from $9 billion initially estimated in 2016 to $19 billion by 2022 (ICIR, 23 May, 2023). Yet, the same Nigerian government has deliberately allowed the state owned refineries to rot away, while no new ones were built for decades. As early as 2016, at a period of acute dollar scarcity, when government was rationing dollar supply for many businesses, the then Buhari government sold dollars to Dangote at subsidised rate that helped the company save as much as $100 million (Reuters, 23 June, 2016). All of these state supports, aside several others, were aimed at helping a private business. More than this, the fact that Dangote refineries have to rely heavily on state support to survive, and after more than a decade in the pipeline, shows the lies in the so-called efficiency of the private sector.

Dangote’s antecedent

But, the question to ask is: with all this state support, can the Dangote refineries solve the permanent quagmire of Nigeria importing fuel at a premium, despite having enormous reserve of crude? Will the Dangote refinery supply cheap fuel to Nigeria? If we are to go by the record of Dangote, as a business entity, reality tells us otherwise. Today, despite Nigeria having almost full capacity for cement production and supply, with Dangote Cement Industry controlling majority of the market, price of cement in the country is prohibitively costly.

Just like the refinery, Dangote Cement was built on the carcass of the state-owned cement companies, coupled with unprecedented state subsidies and waivers. This has helped Dangote Cement to monopolise the market with as much as 70% market share. The refinery is also coming up on the heels of near collapse of state owned oil refineries, and absence of other private refineries, thus giving Dangote a form of monopoly in local oil refining; and thus a major determinant of supply and price. This again knocks a big hole in the false impression of free competition under the free market ideology.

Beyond this, the management of Dangote refinery has clearly stated that its fuel will be sold at international price. According to one of its executives, “the key issue is that if I buy crude, whether from Nigeria or anywhere else, I buy at an international price. If I produce a product and want to sell, I should sell that product at an international price. So, I will not be affected by the decision of local pricing; it is on that concept that we went into refining. We expect that we will buy our input, especially crude, for international market price, and that when we produce products, we will sell those products at international prices.” (Punch, 30 March 2016) This is the logic of capitalist production for private profit.

Theory versus reality

Therefore, unless the Nigerian government is prepared to sell crude oil to Dangote at subsidized rate with a view to getting a reduced cost of fuel for Nigerians, Dangote refinery cannot fundamentally bring down cost of fuel. Of course, the costs associated with the mechanics of fuel importation such as freight, import duties and tariffs, should be eliminated with local production. At the initial stage, this can reflect in a little reduction in fuel price but this will be very marginal and may not last. The fact is that the cost of setting up the refineries has more than doubled, with commercial loans and equity constituting a larger chunk of the funding of the nineteen-billion-dollar refinery. Furthermore, the refinery was set up practically from the scratch, including construction of new power plant, roads and even seaport. All of these will clearly raise the cost of production, and price of fuel. Worse still, the artificial monopoly created for Dangote refinery will also allow it to rip off not only the workers, but also the whole country, by being a major determinant of price and supply.

However, it is not certain that Dangote refinery will be able to meet local consumption given various challenges it is facing. This means that fuel importing may still play significant role in the present period.

While it is true theoretically that local refineries can help to reduce foreign exchange outflow, the reality of the failure of local production of some products such as sugar, rice and cement, to improve Nigeria’s forex crisis tells a different story. The fact that most of the production inputs, aside the raw materials, are imported, in addition to the proclivity of private business to take any advantage for profiteering, makes the so-called gain from reduced forex outflow to be more theoretical than practical. This was demonstrated with the sharp increase in prices of these products (cement, sugar, rice, etc.) with the government’s devaluation of the naira.

However, it is not impossible that local production of fossil fuel may marginally reduce forex outflow, especially given the fact that fuel importation is a major contributor to forex outflow. Yet, this does not guarantee that Nigeria’s forex crisis will be resolved by Dangote refinery or private refineries for that matter. This is especially going to be the case in view of recent decline in Nigeria’s daily crude oil production due to vandalism and oil bunkering. Sale of crude oil still remains Nigeria’s largest foreign exchange earner.

No illusion in Dangote and Partners

Where does this lead us? First, the Dangote refinery has enjoyed huge state subsidies and dole-outs, which have not been available for state owned refineries, or even enterprises and social sectors like public education and health. Even the meagre allocations given to them are looted. Yet, the Dangote refinery will be ripping Nigeria and Nigerians off of billions of dollars as a result of current monopoly of local production. Therefore, the so-called gains, in form of local fuel price and increased forex inflow, which is used as excuse by Nigeria’s capitalist government to give unprecedented subsidies to Dangote, will not be a reality fundamentally.

Flowing from this, Nigerians should not be hoodwinked into accepting fuel subsidy removal and increase in fuel price, under the guise that Dangote refinery will bring down the price. Dangote and his business partners are only out to make mega-profits by exploiting the collapse of state-owned refineries. Nigerians should demand that the government commit public resources to public need, and not to use public resources for few mega-billionaires, who have already taken more than enough from our commonwealth.  This will mean establishing functional refineries and massive investment in renewable energy system and public transport system, which aside providing a sustainable and clean energy will also reduce cost of energy. But without democratic control and open accounting there will always be the danger of looting for private profit and/or manipulation to benefit other companies.

Socialist alternative

However, it will be illusory to expect the TInubu government, or any capitalist Nigerian government for that matter in a neo-colonial economy, to commit to public investment in energy sector. This is because those running Nigeria’s economy represents the interests of the billionaire big businesses, both locally and internationally, and public resources and policies are directed towards their interests. Therefore, we need a socialist system premised on public ownership and democratic running of the economy. This will mean that the major sectors of the economy like the energy and power, financial sector, transport, etc, will be nationalized under workers democratic control and management.

By democratic control and management, we mean that the nationalised sectors will be managed by elected representatives of workers, communities, consumers and relevant professional groups, who will only receive the salaries of workers. Through this, the economic direction and development can be centrally planned and monitored. It will also mean hundreds of billions of dollars of public funds and resources going to private pockets will be used to develop a sustainable economy and fund social sectors like education, healthcare, water and sanitation, etc.

Only a revolutionary government premised on Socialist programmes can implement the above programme. To bring this government to being, working people, youth, poor people, and the progressive middle class need their own mass party with clear Socialist and democratic credentials. The labour movement, which unites the working people, should play the leading role in formation of this party. Unfortunately, the Labour Party, currently supported by a section of the trade union movement, does not represent anything revolutionary or socialist, which is why a new socialist force is needed.