Nigeria’s energy sufficiency is once again under scrutiny as global oil shocks and domestic inefficiencies converge to expose the fragility of Africa’s largest economy. The closure of the Strait of Hormuz in early 2026, coupled with decades of neglect of state-owned refineries, has underscored the vulnerability of Nigeria’s energy security.
The commissioning of the Dangote Refinery has provided a critical buffer, reducing import dependence and stabilizing supply. Yet systemic weaknesses — from crude theft to poor infrastructure — continue to leave the country exposed to external disruptions.
Moribund Refineries and Import Dependence
Nigeria’s four state-owned refineries in Port Harcourt, Warri, and Kaduna have been largely non-functional for decades, operating at less than 10% of capacity. This chronic underperformance has forced the nation to rely on imports for refined petroleum products, draining foreign reserves and exposing the economy to global volatility.
Dangote Refinery: Relief, But Not a Silver Bullet
Commissioned in 2025, the privately-owned Dangote Refinery now operates at 75–85% utilization, meeting up to 85% of domestic demand for petrol, diesel, and aviation fuel. Import dependence has dropped to 15–25%, a significant improvement.
Smaller modular refineries have added capacity, but their output remains limited. Analysts warn that overreliance on a single facility creates new risks if operational disruptions occur.
Global Shock: Strait of Hormuz Closure
The closure of the Strait of Hormuz — a chokepoint for nearly 20% of global oil and LNG trade — following escalating tensions between Iran and the United States, sent shockwaves through global energy markets.
Oil prices surged to $95–$120 per barrel. For Nigeria, this brought fiscal windfalls but also inflationary pressures. Petrol prices are projected at ₦800–₦1,200 per litre, with subsidies cushioning consumers, while deregulated diesel could rise to ₦1,600–₦2,800 per litre, threatening logistics, manufacturing, and agriculture.
Rising Risks: Crude Theft and Fiscal Instability
Higher global prices have intensified incentives for crude oil theft, undermining production gains and fiscal stability. Industry experts warn that unchecked theft could erode the benefits of Nigeria’s improved refining capacity.
Strategic Imperatives for Reform
Analysts and stakeholders have outlined a series of urgent interventions to secure Nigeria’s energy future, beginning with a comprehensive review of the Petroleum Industry Act (PIA). While the Act introduced new regulatory bodies and fiscal frameworks designed to modernize the sector, persistent compliance risks and structural gaps remain. Experts argue that a thorough reassessment is necessary to align the legislation with contemporary realities, ensuring that Nigeria’s petroleum industry remains competitive, transparent, and resilient in the face of global shocks.
Another critical priority is the revival of state-owned refineries. The rehabilitation of the Port Harcourt, Warri, and Kaduna facilities would provide much-needed redundancy, reduce overdependence on the Dangote Refinery, and restore confidence in Nigeria’s refining capacity. Alongside this, regulators are urged to strengthen enforcement mechanisms, particularly Domestic Supply Obligations, to prevent the diversion of refined products abroad and guarantee consistent availability for local consumers.
Stakeholders also emphasize the importance of expanding gas infrastructure. By prioritizing LNG and domestic gas projects, Nigeria can diversify its energy mix, reduce reliance on oil, and unlock new opportunities in power generation and industrial development. Complementing this is the urgent need to combat crude oil theft, which has escalated with rising global prices. Deploying technology-driven monitoring systems and enhancing enforcement capacity are seen as vital to protecting production and fiscal stability.
Looking beyond hydrocarbons, experts insist that Nigeria must invest in renewable energy as part of a long-term diversification strategy. Solar, wind, and hydro projects could provide sustainable alternatives, reduce carbon emissions, and position Nigeria as a leader in Africa’s energy transition.
Finally, the role of industry unions such as the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) remains central. Their collective bargaining power, advocacy for workplace safety, and commitment to job security make them indispensable partners in driving reforms across the energy value chain. Strengthening their institutional capacity would ensure that workforce concerns are integrated into broader policy objectives, fostering stability and accountability in the sector.
Outlook
Nigeria’s energy sufficiency remains fragile. The Dangote Refinery has delivered short-term resilience, but the dysfunction of state-owned refineries and systemic vulnerabilities leave the country exposed to global shocks. Without bold reforms, Nigeria risks replacing one dependency with another — shifting reliance from foreign imports to a single private refinery.
The nation’s energy future will depend on building redundancy, modernizing infrastructure, and diversifying its energy mix. Failure to act decisively could leave Nigeria’s energy security hostage to external forces, undermining economic stability and long-term development.
