Renowned Professor of Petroleum Economics, Wumi Iledare, has said domestic refining should serve as the foundation of Nigeria’s fuel supply. This approach, according to him, will enhance energy security, reduce vulnerability to foreign exchange fluctuations, and retain more economic value within the country.
His argument becomes relevant in light of rising petrol imports in Nigeria during June and July 2026, as highlighted by the NMDPRA’s factsheet.
Professor Iledare noted that the increase in petrol imports, despite significant domestic refining capacity, presents a considerable challenge in the downstream market. He pointed out a nine percent rise in imports, reaching 19.7 million litres per day in July, alongside a decrease in domestic consumption. This situation raises questions about market efficiency, competitiveness, and Nigeria’s progress in shifting from import reliance to domestic refining.
“Domestic refining should become the foundation of Nigeria’s fuel supply, improving energy security, reducing exposure to foreign exchange pressures, and retaining more value within the economy,” he stated. However, he emphasized that domestic production should not be insulated from competition or guaranteed market access, regardless of cost, quality, or reliability.
Iledare acknowledged that imports remain essential when they provide better value, fill supply gaps, or serve as a credible alternative to domestic suppliers.
He commented on Dangote Refinery’s option to export excess petrol, noting that persistent imports could lead to demand uncertainty, inventory risks, and challenges in production planning.
He elaborated that exporting locally refined petrol while continuing to import it illustrates a coordination problem in the market. He warned that if domestic refineries cannot compete due to inconsistent regulations, pricing distortions, infrastructure challenges, or preferential treatment for imports, Nigeria risks missing out on the advantages of its growing refining capacity.
According to Iledare, the appropriate policy response should not be to eliminate imports or shield domestic refiners from competition. Instead, he advocated for a transparent, rules-based market where both imports and domestic refining can operate.
He stressed the importance of maintaining open import access to ensure competition and prevent domestic market power. At the same time, domestic producers should compete based on price, quality, reliability, and supply performance.
He believes that regulation should prioritise enforcing safety and quality standards, ensuring transparent pricing and import procedures, preventing anti-competitive behaviour, and addressing infrastructure and logistics bottlenecks, rather than directing market outcomes or favouring specific suppliers.
“The central policy question is not whether Dangote should compete with importers. It is whether Nigeria can create a competitive framework where domestic refining effectively supplies the market and imports remain available to regulate prices and address shortfalls,” he said. “Such a framework would support energy security, affordability, investment, and national value creation without sacrificing competition.”
Iledare concluded by stating that the success of downstream deregulation should ultimately be assessed not just by the volume of domestic refining or imports, but by the public value generated. The key measure is whether market competition leads to a net welfare gain for Nigerians through reliable supply, competitive prices, reduced economic vulnerability, and greater domestic value creation.
He cautioned that when policy distortions inflate costs, restrict competition, or transfer benefits without corresponding public value, the outcome is a welfare loss, regardless of whether the petrol is refined domestically or imported.
CIURTESY: tribuneonlineng.com
