Our Correspondent | Lagos |
The Central Bank of Nigeria (CBN) has disbursed $1.259 billion in foreign exchange to oil sector operators between January and March 2025, underscoring the central bank’s continued intervention in a market caught between expanding local refining capacity and persistent import dependence.
The forex support, which covered petroleum importation and related transactions, comes amid the intensifying tussle for market share between the Dangote Petroleum Refinery and independent fuel importers, reflecting a transitional phase in Nigeria’s downstream energy landscape.
Forex Support Reflects Fragile Transition
Data from the CBN’s first-quarter statistical bulletin show that the bank disbursed $457.83 million in January, $283.54 million in February, and $517.55 million in March — totalling $1.26 billion within three months.
While the volume of imports has declined compared with previous years, petroleum marketers still imported about 2.28 billion litres of petrol in the first quarter of 2025.
Figures from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) show that imports accounted for 69 per cent of national consumption — equivalent to 21 billion litres between August 2024 and early October 2025.
Despite the commissioning of the 650,000 barrels-per-day Dangote Refinery, the import share remains significant, highlighting the slow pace of Nigeria’s shift from fuel dependence to self-sufficiency.
Energy analysts say the CBN’s sustained forex interventions illustrate the central bank’s dilemma: balancing the need to maintain fuel supply stability with the goal of conserving foreign reserves and defending the naira.
“Fuel imports remain one of the largest drains on Nigeria’s external reserves,” said a Lagos-based energy economist. “The CBN is walking a tightrope — supporting imports to avoid shortages, while trying to promote domestic refining and reduce forex pressure.”
Pricing, Not Patriotism, Drives Supply Choices
Competition between the Dangote Refinery and fuel importers has become increasingly price-driven.
While Dangote continues to export petrol to foreign markets — including the United States — many local marketers say they will continue to source from the cheapest supplier, regardless of origin.
“In this business, pricing is everything,” said Chinedu Ukadike, National Publicity Officer of the Independent Petroleum Marketers Association of Nigeria (IPMAN).
“Marketers will always go for the most affordable option because our margins are very thin. If imported products are cheaper, we’ll buy from importers; if Dangote’s price is better, we’ll buy locally.”
Ukadike noted that exchange rates, global oil prices, and government policy shifts are key factors shaping purchasing decisions. “No marketer can afford sentiment when it comes to survival. Our decisions are driven by economics, not emotion,” he said.
This competition is reshaping Nigeria’s downstream market, where traders are switching between local and foreign sources based purely on short-term cost advantages rather than long-term supply contracts.
Import Parity Prices Fall Amid Global Volatility
Fresh data from the Major Energies Marketers Association of Nigeria (MEMAN) show a reduction in the import parity price (IPP) of Premium Motor Spirit (PMS) to ₦805.46 per litre at the current spot rate.
The drop reflects lower global oil prices and an easing of freight and insurance costs.
However, downstream operators caution that the impact of global movements on local pump prices remains limited due to exchange rate volatility, high logistics costs, and fiscal uncertainty.
“The decline in IPP is welcome, but it doesn’t automatically translate into lower pump prices,” said a downstream analyst at a Lagos investment firm. “The key variables remain forex access, logistics, and pricing transparency from both the government and the refinery.”
Macroeconomic Implications: Balancing Policy and Market Realities
Fuel imports are a double-edged sword for Nigeria’s macroeconomic stability.
While ensuring product availability, they place enormous pressure on foreign reserves and the exchange rate, two of the CBN’s most sensitive policy levers.
The apex bank’s $1.25 billion allocation in Q1 2025 represents a modest decline from the previous quarter, consistent with reduced import volumes — yet it still reflects the scale of Nigeria’s forex exposure to the energy sector.
“The ongoing forex injections suggest that the government is prioritising short-term energy security over medium-term currency stability,” said another economist. “Until local refineries operate at consistent capacity and distribution bottlenecks are resolved, imports will continue to consume scarce forex.”
The Road Ahead: Policy Clarity, Market Discipline
Nigeria’s downstream sector stands at a crossroads. On one hand, the Dangote Refinery promises to transform domestic supply chains, create export potential, and conserve foreign reserves. On the other, market liberalisation and price deregulation have left room for volatility, speculation, and uneven pricing practices.
Industry experts argue that the success of local refining will depend not only on Dangote’s output but also on policy consistency, exchange rate stability, and the availability of credit and logistics support for smaller operators.
“The next phase is not about capacity alone; it’s about competitiveness,” said an analyst at CardinalStone Partners. “If Dangote can consistently offer prices below import parity, market forces will naturally tilt in favour of local supply.”
Slow but Defining Shift
The CBN’s sustained forex intervention underscores the reality that Nigeria’s energy transition remains a marathon, not a sprint.
The balance between local production and import dependence will continue to test policymakers’ resolve — and determine the long-term stability of both the naira and the fuel market.
With the global oil market in flux and domestic players repositioning, 2025 may emerge as the year Nigeria begins to wean itself off fuel imports — but only if pricing, forex access, and policy alignment move in the same direction.