Nigeria’s Oil Refining Sector Records First Growth in Five Years

Nigeria’s oil refining sector rebounded in Q4 2024, posting its first quarterly growth since 2018, according to the National Bureau of Statistics (NBS). The sector expanded by 9.59 percent, marking a turnaround after years of decline due to aging infrastructure, limited refining capacity, and reliance on imports.

A key driver of this recovery was the launch of the 650,000-barrel-per-day Dangote Refinery, which has reshaped the market by supplying refined products domestically and internationally. Despite this growth, the sector’s nominal value declined slightly to N20.5 billion (US$13.7 million) in 2024 from N22.8 billion (US$15.23 million) in 2023, highlighting lingering challenges.

Dangote Refinery’s competitive pricing strategy has positioned it as a dominant player, reducing Nigeria’s dependence on fuel imports and improving trade balance. However, experts argue growth could have been stronger if Nigeria’s three state-owned refineries – Port Harcourt, Warri, and Kaduna – were operational.

Their prolonged inactivity has left the refining industry largely dependent on Dangote.

The broader oil sector also showed resilience, growing 5.54 percent annually in 2024 after contracting by 2.22 percent in 2023. However, Q4 growth slowed to 1.48 percent from 12.11 percent in Q4 2023 due to base effects.

Higher crude prices, increased production (from 1.44 mbpd in 2023 to 1.5 mbpd in 2024), and government reforms – including fiscal incentives and streamlined regulations – contributed to this recovery.

Challenges remain, including regulatory uncertainty, infrastructure deficits, and security risks in oil-producing regions. Despite recent gains, global investors have steered an estimated US$80 billion in energy investments away from Nigeria over the past decade.

In response, President Bola Tinubu issued policy directives in early 2024 aimed at removing investment barriers and boosting Nigeria’s energy sector competitiveness.