Nigeria's Dangote oil refinery launches fuel distribution service to curb prices

Nigeria's Dangote refinery will begin its own domestic distribution of diesel and gasoline starting in August, in a move it says can deflate fuel prices and boost national demand.

A statement from the refinery said that from Aug. 15, it will begin free distribution of its motor fuels to marketers, retail stations, telecoms companies and aviation customers, and pledged to "transform Nigeria's fuel distribution landscape" by cutting out third parties.

Since starting up in January 2024, the 650,000 b/d refinery has so far relied on local traders and marketers to load its fuel onto their trucks and sell it across the country.

When the refinery was inaugurated, some analysts warned that infrastructure limitations in Nigeria could create bottlenecks for its domestic logistics, making tanker loadings from its nearby port potentially more attractive.

To support the scheme, the Dangote Group has invested in 4,000 new compressed natural gas powered-tankers and 100 CNG stations to support its operations, it said.

The government has long promoted CNG as a low-cost alternative to gasoline for Nigeria's drivers, particularly as the government has eyed new projects to leverage the country's gas supplies. The fuel alternative is estimated to be around 40% cheaper than gasoline on a like-for-like basis, but limited availability of filling stations has held back uptake.

In an attempt to boost partnerships with SMEs and grow its reach into rural areas, Dangote refinery will also offer credit facilities for "bulk buyers" purchasing over 500,000 liters of supply, it said in its statement.

Affordability hopes

Speaking to Platts, part of S&P Global Commodity Insights, on June 16, a Dangote spokesperson said the downstream distribution venture would drive down Nigerian fuel prices, supporting affordability and combating inflation.

Boosting Nigeria's fuel affordability was a key objective behind the Dangote refining project, which aimed to displace fuel imports historically sourced from Europe.

However, the removal of a government gasoline subsidy, initially in 2023 and unofficially again in 2024, has contributed to stubbornly high fuel costs that have crimped domestic demand.

In May 2025, Nigerian gasoline retail prices stood at around Naira 900/liter ($0.58/liter), up from around Naira 200/l ($0.13/l) two years previous, before the subsidy was removed.

Traders said the rollout would be greeted with criticism from Dangote's marketers, but expected efficiency gains from direct deliveries to retail stations over third-party depots.

The move could also signal a renewed commitment by Dangote to serve the domestic fuel market and forgo exports.

Demand for gasoline, Nigeria's main fuel type, has recently fluctuated from around 300,000 b/d to 350,000 b/d, well above current output from the refinery.

However, the site has continued to export some product to neighboring West African markets, sources say, noting that dollar-based export markets remain economically attractive.

A deal with Nigerian national oil company NNPC obliges Dangote to supply at least some of its fuel to the local market in naira in exchange for the crude it receives in the local currency.

Under the latest terms of the agreement, both parties agreed to a monthly crude volume to be allocated to the refinery, and Dangote is obliged to sell an equivalent value of products to NNPC, a company source told Platts. Dangote was last allotted 200,000 b/d of crude oil from NNPC in June, according to the company executive.

Ramp-up progress

By controlling its own distribution, the major refinery could make its production volumes even more opaque as it has kept markets guessing over its current operations.

The site is still ramping up its production after four weeks of maintenance to address "design issues" on its main gasoline unit in May and is running at an 85% utilization rate, the company executive said.

However, traders expressed uncertainty over actual processing rates and ramp-up times, noting volatile selling activity and gasoline quality from the site.

"I'm hearing lots of issues with Dangote," one market source said. "One day he offers one price, the next day he offers very different. They keep offering to the international market to attract USD, but WAF is getting a lot heavier these days."

The Dangote Group declined to comment.

Nonetheless, returning volumes from the site has contributed to a price slump in the Offshore Lome market, where imports are delivered and then shipped inland.

"Traders all expected the refinery to undergo a longer turnaround maintenance," one source said, noting a $10-$15/mt slump in prices for Offshore Lome gasoline.

"People are scrambling to get rid of product," he said.