The United States is a contradiction when it comes to petrol. On paper, it pumps out more crude than any other nation on earth—almost 15 million barrels of petrol a day—and yet, it is still one of the world’s largest importers of refined petrol. But this is not a sign of failure. It is a calculated strategy.
The U.S. maintains a mix of domestic refining and imports to avoid putting all of its eggs in one basket. This way, prices can stay competitive, the supply chain remains resilient and, importantly, not one single company can hold the entire market hostage.
This balance is not only unique to America. Norway manages its equilibrium, and Saudi Arabia is gradually diversifying its economy. Oil-producing countries have grappled with how much petrol to refine at home, how much to buy abroad and how to prevent monopolies from developing.
Now, Nigeria is at its own crossroads as a court ruling looms that could ban petrol imports. The court case was brought by the Dangote Petroleum Refinery, a $20 billion marvel of engineering touted as the answer to Nigeria’s petrol importation problem. On paper, this is a win for Nigeria, but in practice, the risks are palpable.
It’s important to note that this opinion piece is not about vilifying ambition. When Nigeria’s large-scale refinery achieves full operationality, it can refine 650,000 barrels of crude oil a day. But self-sufficiency should not mean that the country swaps one pain point for another vulnerability.
Economists in Lagos have been whispering about the “paradox of plenty” to describe countries that are cursed by their own wealth. One economist said bluntly, “If we allow one refinery to become the only game in town, we are changing the person that controls it and not solving any problem.”
Read also: High petrol imports seen threatening investment in Nigeria’s refining sector
Why import when you produce? America’s playbook
Theoretically, the U.S. can refine all its petrol. One of the reasons it doesn’t is logistical; some areas don’t have pipeline access, and imports are cheaper. But a lot of the reason is rather deliberate policy. By allowing imported petrol to compete, the U.S. prevents any domestic refiners from becoming complacent.
Prices at the petrol stations in California and New York reflect the global markets and not the whims of a handful of oil executives. When pipelines are destroyed or hurricanes batter refineries on the Gulf Coast, imports from Asia or Europe help cushion the blow.
There is also the geopolitical angle. Relying only on domestic refining tends to strain infrastructure and tie up capital. Why inject billions into new refineries when the existing global networks can supplement demand? This policy is pragmatic. It is a hard-baked insulation against shocks.
Like Norwegians, Saudi Arabia
Let’s compare this to Norway, where their version of the NNPC, Equinor, dominates production and refining. Despite this, imports account for around 5 percent of petrol consumed, with 2023 imports at $5.17 billion.
Why? In part to hedge against any maintenance shutdowns, but also to keep prices from spiralling uncontrollably. While Norway’s approach is similar to America’s, it is very controlled, but more importantly, the country resists absolute self-reliance.
Saudi Arabia, like Nigeria, spent decades exporting crude oil and importing gasoline. But even that is changing now, as new massive projects like the Jazan Refinery promise to boost capacity; still, the kingdom has not banned imports. In 2023, Saudi Arabia imported around $13.2 billion of refined petrol, making it the 20th largest importer of refined petroleum.
Private players are able to bring in petrol, and that ensures that Aramco’s dominance does not change into a stranglehold.
The UAE’s experiment: “Managed” competition and free zones
The UAE has a different model, as Abu Dhabi’s ADNOC refines over 90 percent of the domestically consumed petrol, but the country still permits importation through the free zones like Jebel Ali.
This creates managed tension. The ADNOC can set a baseline price, and traders can undercut it if the global prices fall below the baseline. As a result, the UAE enjoys a hybrid system where the state is able to retain control without stifling market forces.
At its core, it acknowledges a universal truth and tries to mitigate any fallouts: Monopolies, even when very efficient, can breed fragility.
Reporting live from Apapa, Lagos, Nigeria
The Dangote Refinery is undeniably impressive. It is the largest single-train refinery in the world, and when it attains fully, it will be able to refine 650,000 barrels a day. As Nigeria has spent billions subsidising and importing petrol, the promise of self-reliance is intoxicating. I’m even excited by that idea.
But is that what Nigerian consumers need? Stopping petrol imports overnight, as the court might mandate, ignores the lessons other producers have to teach.
Read also: Petrol imports gulp N3.3trn in three months despite rising local refining
Let’s look at the risks
– Supply chain brittleness: Refineries always need maintenance. Sometimes, errors happen. In 2023, outages in the U.S. Gulf Coast led to a hike in petrol prices by around 30 percent in a few weeks. Nigeria could face the same fate if there are no backups.
– Price manipulation: A single player, no matter how well-intentioned, will dictate terms. In Venezuela, the PDVSA once had unilateral power, and its decline left the entire country scrambling.
These are not hypotheticals.
The Nigerian government, through the PIA, has lauded its “fully deregulated” petroleum sector. But deregulation goes beyond removing price controls.
There needs to be fair competition. Granting carte blanche to the market with its one refinery that is dominant betrays that principle. Very often, we conflate private enterprise with free markets, but a private monopoly can be just as extractive as a state-owned one.
Nobody is suggesting that Nigeria shuns its refinery. But we have seen other major oil producers offer us templates for balance. At a minimum, the government, through the regulatory agency, needs to maintain imports, mandating that a percentage of locally consumed petrol comes from abroad as a safety valve.
The country needs clear antitrust triggers; like if a company’s market share exceeds 75 percent, there should be automatic reviews that kick in, and finally, import licences should be issued to companies with capacity transparently to prevent cronyism.
The shadow of the Standard Oil playbook
A century ago, America’s Standard Oil controlled an estimated 90 percent of America’s refining. It took an antitrust case to break its grip. Nigeria today is at a similar juncture. This burgeoning petrol industry can only operate optimally in a market where several players can rise to challenge market incumbents.
The decision of the court will determine the next phase of Nigeria’s economic maturity. Will Nigeria cling to the illusion of control or embrace the mess of competition? The world’s oil giants–America, Norway, the UAE & Saudi Arabia–have decided.
Kemi Osineye is an economic analyst based in Lagos.
