Who Wins When Nigeria’s Richest Man Takes on the ‘Oil Mafia’?
The commissioning of Aliko Dangote’s $20 billion (£15.5 billion) oil refinery, a state-of-the-art facility poised to revolutionise Nigeria’s downstream oil sector, stands as one of the nation’s most significant business developments in decades. Yet, amidst the fanfare, Nigerians are left pondering two critical questions: Will fuel finally become affordable? And will the infamous, hours-long fuel queues become a thing of the past?
The answers are far from straightforward. Cheaper petrol may remain elusive unless global crude prices fall, while the end of fuel queues hinges on dismantling entrenched corruption within the sector – what Dangote himself refers to as “the oil mafia.”
A Sector Mired in Corruption
Since Nigeria struck oil in 1956, its downstream industry has been notorious for inefficiency and corruption. Successive governments have maintained a tight grip on the sector, creating opaque systems where billions vanish without accountability. For years, the state-owned Nigerian National Petroleum Company (NNPC) was at the heart of the problem, as oil revenues disappeared amid scandal and mismanagement.
In 2016, headlines like “Nigeria’s state-owned oil firm fails to pay $16bn in oil revenues” captured the dysfunction, and it wasn’t until 2020 that the NNPC began publishing audited accounts. Yet, the damage was done. Over the last decade, the government spent $25 billion attempting – and failing – to fix the country’s outdated refineries, leaving Africa’s largest oil producer reliant on costly fuel imports.
Dangote’s Vision for Change
The Dangote refinery, located near Lagos, has a capacity of 650,000 barrels of crude per day and is expected to reduce Nigeria’s dependence on fuel imports. By refining crude locally and selling in naira, it will also free up foreign currency, easing pressure on the naira, which has seen its value plummet under market reforms.
Despite these potential benefits, the refinery’s success faces challenges. The pricing of crude oil remains tied to global markets, meaning local refining won’t shield Nigerians from international price fluctuations. Moreover, the facility’s ability to disrupt the status quo has provoked backlash from entrenched interests benefiting from Nigeria’s inefficient oil trade.
“When this project began, I knew there would be resistance,” Dangote admitted at a conference. “But I underestimated the strength of the oil mafia – it’s a cartel stronger than the drug mafia.”
Old Habits Die Hard
Dangote’s refinery marks a turning point, but the transition won’t be smooth. Critics accuse both the refinery and regulators of opacity, with disputes over crude allocation, pricing, and licensing further complicating matters. NNPC’s struggles to meet supply agreements and its substantial debt burden – exacerbated by oil theft and declining production – have only added to the chaos.
Meanwhile, consumers grapple with the economic shock of subsidy removal, which tripled fuel prices overnight in mid-2023. Many Nigerians remain sceptical about promises of reform, especially as fuel marketers and regulators trade accusations of malpractice.
A New Era or Business as Usual?
Despite the turbulence, some experts see the challenges as growing pains in an evolving sector. Amaka Anku of the Eurasia Group likens the situation to the early days of American industrialists like JP Morgan, where government intervention and private ambition reshaped the economy.
“This drama is part of a normal process when you’re restructuring an economy,” she said. “The refinery has the potential to transform Nigeria’s oil industry into one that’s transparent, competitive, and beneficial to the population.”
For now, the battle between Dangote’s refinery and the oil mafia continues. While Nigerians may not see immediate relief at the pump, the refinery offers a glimmer of hope for an industry long plagued by corruption. Whether that hope materialises into tangible change remains to be seen.
