CPPE CEO Dr. Muda Yusuf says domestic refineries help but cannot fully shield consumers from international market shocks….
The recent spike in petroleum product prices in Nigeria is closely tied to rising crude oil costs on the global market, a development experts say has been triggered by escalating geopolitical tensions in the Middle East.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf in a statement on Monday disclosed that that crude oil remains the most critical input in producing refined petroleum products, accounting for the largest share of production costs worldwide.
“In just a few weeks, global crude oil prices have jumped from around $65 per barrel to over $100 per barrel, an increase of more than 50 percent. This surge is directly reflected in the cost of fuels like petrol, diesel, aviation fuel, and LPG here in Nigeria,” Dr. Yusuf said.
Domestic refineries not a complete shield
Many Nigerians expect that the presence of local refineries would automatically lead to cheaper fuel, but Dr. Yusuf explained that domestic refining cannot fully insulate the market from global price swings.
“Crude oil for Nigerian refineries is priced using international benchmark rates, whether it comes from local producers or the national oil company. Even when crude is purchased locally, refineries often pay a premium of $3 to $6 per barrel to secure supply,” he said.
According to Yusuf, while some transactions are settled in naira, the underlying price remains tied to the dollar value of crude oil. This means that domestic refining improves supply stability but does not eliminate exposure to global price movements.
Savings on logistics
One area where domestic refining does provide an advantage is in reduced logistics costs. Importing crude or refined products involves shipping, insurance, port handling, and other charges that are avoided when crude is sourced locally.
“Local refining offers modest savings in logistics, which become even more important during global supply disruptions when shipping costs rise sharply,” Yusuf said.
Boosting energy security
Experts say the expansion of Nigeria’s domestic refining capacity strengthens the country’s energy security. For decades, Nigeria relied heavily on imported fuel despite being a major crude producer, leaving it vulnerable to supply shocks.
“Local refineries ensure that more petroleum products are produced within the country, reducing dependency on imports and protecting the domestic market from international supply disruptions,” Yusuf noted.
Foreign exchange and economic benefits
Domestic refining also reduces pressure on Nigeria’s foreign exchange reserves. Historically, Nigeria spent between $10 billion and $15 billion annually importing refined petroleum products, placing a strain on reserves and impacting exchange rate stability.
“With increased local refining, the need for imports declines, conserving foreign exchange and strengthening the external sector. It also opens opportunities for exports, which can generate additional revenue for the country,” Yusuf said.
Industrial growth and job creation
Beyond fuel supply, domestic refining supports industries that rely on petroleum products as feedstock, including petrochemicals, fertilizers, plastics, pharmaceuticals, and paints.
“The refining sector stimulates activity across the petroleum value chain from storage and transportation to distribution and retail, creating jobs and contributing to economic growth,” Yusuf added.
Policy support critical
Yusuf emphasized that government policies must continue to support investment in domestic refining. Key measures include ensuring reliable crude supply, strengthening distribution infrastructure, introducing trade protections, and promoting export competitiveness.
“While domestic refining cannot completely insulate Nigerians from global oil price fluctuations, it significantly reduces risks, conserves foreign exchange, strengthens the balance of trade, and enhances energy security. It is a key pillar of economic resilience and long-term energy sustainability,” he concluded.
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