Question: Could you introduce yourself and your background in oil and energy markets?

Dr. Kaase Gbakon: I am an energy economist with two decades of experience across Nigeria’s oil and gas industry, including commercial analysis, project economics, strategy and energy policy at the Nigerian National Petroleum Company (NNPC). I hold a PhD in Petroleum Economics, Management and Policy, and I analyze global oil and gas markets from Canada. I write regularly on energy market developments informed by public data and proprietary modeling, with insights into the technical and commercial aspects of the oil and gas value chain.

Question: In your opinion, are we in the midst of a great fuel crisis like oil executives are claiming?

Dr. Kaase Gbakon: Indeed, this is the middle of a fuel crisis. The current energy situation has no recent historical precedent. This has been caused by the geopolitical tensions in the Middle East and Europe.

In the Middle East, escalation of fighting around the Strait of Hormuz and the Bab-el-Mandeb Strait has constricted energy supply. Across the world, gasoline prices have risen by between 8% and 70% since the US–Iran War commenced. Additionally, the Russia–Ukraine War, although it began in 2022, still contributes to the current energy challenge.

The crisis has manifested itself along several vectors: oil price volatility; increases in the price of refined products, gas and Brent-indexed LNG; and now historically low inventory levels. US diesel prices have surpassed $6.50 per gallon, the highest level in recorded history. When adjusted for inflation, however, today’s diesel price is nearly 15% higher than the average baseline (2011–2014). It is near parity with the price during the 2022 supply shock and still roughly 10% below the all-time inflation-adjusted peak from the 2008 financial crisis.

In addition, jet fuel stocks are running low in certain European hubs and have to be alternatively sourced. Countries drained crude stocks to try to keep prices stable and are now running low. It has been difficult to replenish these stocks under such high oil price conditions.

Question: Geopolitical instability drives up the cost of living in many countries. How does the fuel crisis impact Nigeria?

Dr. Kaase Gbakon: The primary channel through which the geopolitical shocks have transmitted to Nigeria has been via transport fuel prices. Between the start of the US–Iran War in February to August, diesel prices in Nigeria increased by 5% to 45% across the country. Gasoline prices increased by 12% to 30% in that same period. Jet fuel from Nigeria’s Dangote Petroleum Refinery increased by 20%.

The fuel price increase impacted on the level of fuel consumption. Since February 2026, gasoline consumption has fallen by 26%. Current consumption levels are 17% below the long-term average gasoline demand of 50 million liters per day used in supply planning. Increased transport fuel costs then feed into inflation through the basket of goods, which are commonly purchased items used to track inflation by the National Bureau of Statistics (NBS). According to NBS tracking, road transport costs have risen by between 21% to 39% year-on-year, while the average airline fare increased by 21% Y-o-Y.

Tracking by the SBM using their proprietary “jollof rice index” — a measure that tracks the cost to prepare a pot of jollof rice, a Nigerian staple — shows a 14% rise in food costs between February and June 2026.

The sharp and volatile increases in fuel, transport and food prices have coincided with a sensitive time in the Nigerian political calendar. Campaigns for the January 2027 general elections kicked off in August. Parties have made the increased fuel prices and general rise in cost of goods a campaign issue.

More importantly, the opposition has tied the rising gas prices and cost of living to the administration’s twin policies to float the nation’s currency and remove the subsidy on gasoline. Consequently, the sharp fuel price increase has reignited the supposedly concluded debate about the desirability of a subsidy on gasoline and introduced it as a political campaign issue.

Question: Can you describe Dangote’s recent rise as Africa’s biggest Initial Public Offering (IPO)?

Dr. Kaase Gbakon: Dangote Refinery’s IPO is significant both because it is Africa’s largest and because it marks the transition of one of Nigeria’s most strategically important industrial projects from a privately controlled asset into a publicly owned company. 

As per the current IPO terms, about 4.1 billion shares at 525 naira each ($0.40) are on offer, seeking roughly 2.15 trillion naira ($1.6 billion), with the refinery valued at roughly 62 trillion naira ($47 billion). The refinery intends to support the expansion of the Lekki facility toward 1.4 million barrels per day (bpd) with these proceeds. Viewed retrospectively, I would argue that many of the refinery’s strategic and commercial moves since its commencement of operations strengthened the business ahead of the IPO.

An example of this is Dangote securing an assured and sustained crude supply, which forms the basis of the entire refining business model. The refinery argued that it should have preference under the domestic crude supply obligation, even as the government already committed equity crude under previous financial arrangements. Dangote filed a court order to stop the issuance of import licenses for alternative products. The company meets local demand, and this move would consolidate its market power. From the perspective of value preservation, this would effectively alter the fuel market structure, concentrate pricing power in the refinery and enable it to raise prices.

The company diversified its exports to multiple regions as well, amplifying this growth and aiding Nigeria’s registered trade surplus. Actively exporting to markets in Africa, the US, Europe and Asia contributed to 12.6 trillion naira ($9.5 billion) in Q2 2026 alone. Additionally, the refinery is now in a position to take advantage of products priced at a premium in foreign jurisdictions and paid for in foreign currency, essentially helping the refinery earn in USD.

In the months leading up to the IPO, the refinery engaged in strategic communication, branding it as “the people’s IPO.” Before the existence of the Dangote refinery, the state-owned NNPC and its allies of petroleum product importers were largely responsible for fuel supply to the country, and bore the burden of every supply hiccup and fuel price hike. In this context, the Dangote refinery potentially becomes the lightning rod for any disaffection with petroleum supply. A people-centric brand would engender a sense of shared ownership and serve to dilute any future consumer backlash the refinery might potentially come under.

This list of issues on which the Dangote refinery advocated from the early days maps directly to the identified risks in its business model. Even without an IPO in mind, these factors are critical for the positive economics of a refinery. They became more sharpened within the context of the planned IPO to derisk the project. The above levers strengthens the commercial proposition to investors and underpins the valuation of 62 trillion naira ($47 billion).

Question: To what extent does the country’s economy rely on Dangote, and vice versa?

Dr. Kaase Gbakon: The refinery and Nigeria’s economy are interdependent in several important ways. First is that Nigeria provides a huge captive market for the refinery for the slate of transport fuels. Given that per capita consumption of refined products in Nigeria and Africa is far below the global average, there is still a lot of headroom for demand to grow, which the refinery is poised to meet.

The refinery also benefits through favorable tax provisions, which effectively improve its economics and valuation, such as a 15% regular corporate tax rate instead of 30%, and duty-free machinery imports. The “Naira-for-Crude” feedstock supply arrangement with the government is also a key interdependency. It is a framework which effectively shields the refinery from foreign exchange volatility, enabling it to profit by incurring a significant share of costs in naira, while they export about 40% of its production, earning revenues in a foreign currency. Dangote sourced more than half of its raw material locally under this arrangement in the 12 months before June 2026, but the company most recently announced it will again price local sales in USD to recoup losses as it struggles to secure sufficient local volumes.

Conversely, Nigeria’s trade balance improves given the exports of refined products. The presence of the 26 trillion naira ($20 billion) refinery investment signals that Nigeria can execute big projects, which is a huge talking point for Nigeria as an investment destination. The refinery reduces Nigeria’s import dependence for refined products, retaining those scarce USD in-country. The presence of the refinery also contributes to the development of technical education within the country. Lastly, the refinery contributes positively to the GDP of the country. At 119,300 naira ($90) per barrel (bbl) oil price and 40% of full-capacity production exported, I estimate that the refinery’s export earnings represent about 2% of Nigeria’s current GDP of 384 trillion naira ($290 billion).

Question: Does the company have enough refining capacity to ease the pain of international partners in this fuel crisis, and will this give Nigeria leverage in its global energy relationships?

Dr. Kaase Gbakon: Dangote cannot independently solve Europe’s fuel shortage. However, its strategic location and product offerings position Nigeria favorably in energy diplomacy, especially within the sub-region and in specific fuel categories.

For context, it is helpful to understand the demand profile of Jet A1 and diesel in the European and Sub-Saharan African markets that the refinery has supplied thus far. The UK’s Jet A1 demand sits at approximately 258,000 bpd, of which it imports 168,000 bpd — a 65% import dependency. The Dangote refinery can produce 110,000 bpd of Jet A1 at full capacity utilization. Nigeria’s demand for the aviation fuel at about 19,000 bpd leaves 91,000 bpd available for export both to West Africa and beyond. West Africa (excluding Nigeria) consumes around 18,000 bpd, leaving 73,000 bpd for potential export to Europe.

This export potential can cover up to 43% of the UK’s total import requirement. So, while the refinery is key to keeping UK planes in the sky and can do its own part in easing the pain of international partners, the UK aviation market will still need to aggregate supply from other sources.

On diesel, the refinery exported its diesel mostly to West African neighbors, which together have an estimated demand of 76,000 bpd. At capacity and under steady conditions, the refinery can produce up to 162,000 bpd of diesel. Nigeria’s current diesel demand is about 90,000 bpd which will leave 72,000 bpd for export. This is sufficient to cover 95% of West African diesel demand.

So, if the Dangote refinery prioritizes domestic and West African regional diesel supply over export outside the continent, then there’s no capacity to export to the UK market — which has an import requirement of about 300,000 bpd. However, if the refinery chose to prioritize the UK market over the regional market, the refinery would only be able to meet, at most, 24% of the UK’s import requirement. The Dangote refinery can meet up to 43% of the UK’s Jet A1 import requirement, but has no spare capacity to meet the UK’s diesel import requirement given that the West African sub-region easily absorbs all of the refinery’s diesel production.

Question: Can you explain what significant events contributed to Dangote’s Q2 increase in energy exports to Europe? Is this a sign of Nigeria’s growing self-autonomy regarding national resources?

Dr. Kaase Gbakon: Dangote Refinery’s exports of Jet A1 to Europe in Q2 represent more than 70% of its full-capacity Jet A1 production and are materially higher than its exports from Q1 2025. Prior to the US–Iran War, roughly 50% to 65% of Europe’s total external and seaborne jet fuel imports came from the Middle East. The war with Iran, however, led to the closure of the Strait of Hormuz. This meant the supplies from India and other sources, which would previously sail through three maritime choke points to get to Europe, were trapped. The alternative would be the economically challenging longer route around South Africa, through the Atlantic to get to Europe.

Before 2022, Europe sourced 50% of its diesel imports from Russia. However, bans on Russian imports and intensified Ukrainian bombing of Russian refineries made Europe import its diesel mostly from the US, India and the Middle East. So, two geopolitical events which commenced four years apart seized the major sources of distillate supply to the European market.

The Dangote refinery, however, located in the Atlantic basin, thus stepped in to replace these cut-off supplies and meet European demand without the encumbrance of maritime chokepoints. Even as these geopolitical events caused the prices of refined products to rise, the effect within Nigeria has been a decline in demand, as Jet A1 consumption fell by 50% from 22,000 bpd to 11,000 bpd between January and July 2026. The combination of falling domestic demand and steady European demand drove the refinery to export its Jet A1 into the lucrative European market.

There is also another structural angle to this, which is the steady closure of European refineries. In the last 45 years, Italy lost 42% of its capacity, Germany 39% and the Netherlands 33%. The UK specifically lost 56% of refinery capacity. Further oil production from the UK side of the North Sea declined from a 1999 peak of 3 million bpd to 0.6 million bpd. Combine this loss in refinery capacity with the loss in upstream oil production, and we see that Europe neither has the ability to produce its own crude oil nor the capacity to refine it for its needs. This has necessitated a reliance on product imports since 2013.

At current demand levels and price sensitivity, I would cautiously accept that the ability of the Dangote refinery to export is some evidence of Nigeria’s autonomy. This caution hinges on the reality that Nigeria’s economy still has a lot of headroom to grow, domestic energy consumption is still relatively low per capita and there is but one regional mega-refinery which, in risk management terms, represents a single point of failure — even if the scenario is unlikely.

Question: Nigeria has consistently missed its Organization of the Petroleum Exporting Countries (OPEC) quotas in the past. Will Dangote Refinery prevent this in the future, or do government-level challenges remain?

Dr. Kaase Gbakon: The refinery, on its own, cannot prevent Nigeria from missing its OPEC production quotas. Nigeria’s OPEC quota is fundamentally an upstream production issue. Dangote Refinery does not directly determine whether Nigeria complies with that quota. Increasing upstream oil production is a fundamental requirement to feed the refinery, provide feedstock access to other independent refiners and earn foreign exchange by crude oil trading.

The government has provided fiscal incentives for upstream field development. Deepwater final investment decisions (FIDs) have already been taken on the strength of these policy initiatives. With diligent execution, these projects should soon be contributing to national production figures and eventually to the supply pool available to the refinery. 

However, Dangote Refinery serves as a constant strategic reminder on the need for Nigeria to increase its upstream oil production so as to improve the refinery’s optionality for raw material access. Nigeria’s oil production peaked in 2005, steadily declined until 2022, but started to recover by 2025. The strategic risk is glaring: allowing upstream production to decline or plateau while the country’s demand for refined fuels gradually increases will lead to increasing imports of both crude oil for the refinery and refined products to bridge the gap. This is why the planned expansion of the refinery to 1.4 million bpd is important. It is a forward move that mitigates the need for refined product imports.

Increasing upstream oil production should be the objective to mitigate the need for raw material, or crude feedstock, imports. In that sense, the Dangote refinery cannot solve Nigeria’s OPEC quota problem. Rather, it makes solving Nigeria’s upstream production problem even more economically important.

Question: What are the regional implications for Sub-Saharan nations that have historically relied on refined crude imported from outside of Africa?

Dr. Kaase Gbakon: Africa imported $104 billion worth of refined products in 2023, 42% of which was due to Nigeria, South Africa and Egypt. This huge expenditure represents an exit of scarce foreign currency to satisfy demand for only one type of energy, which can only be expected to keep growing. The Dangote Refinery aims to displace those imports and keep a bigger slice of the foreign exchange circulating on the African continent.

In addition to producing transport fuels like gasoline, diesel and Jet A1, the refinery also produces high-value petrochemical products. These products can serve as the raw materials for other industries to manufacture everyday items such as plastics, industrial alcohol, detergents and cleaning agents in the sub-region.

Now the tables are turning. In the first half of 2026, over 60% of Nigeria’s petroleum product exports were to other African countries. Nigeria earned 998.5 billion naira ($753 million) from the total petrol exports over this period. This is the amount in US dollars that would have left the continent if not for Nigeria’s refining capacity.

Question: Given your expertise in broader energy strategies, do you believe that Dangote is exporting to a shrinking market, especially since Europe is pushing toward green energy?

Dr. Kaase Gbakon: Europe, and especially EU countries, has decided through deliberate climate and energy policies to reduce the demand for oil, gas and coal. This has meant a push for electrification of the economy, with power generated from wind and solar, and a forced, policy-propelled decline in fossil use. There is also the issue of a shifting demographic and structural changes in European economies, which will exert downward pressure on per capita consumption of refined fuels. However, there are four factors I can identify that can work in the Dangote refinery’s favor, despite declining per capita use of refined fuels in its European export market.

First, despite the benefits of access to an export market, the refinery will also gain significantly by satisfying the demand on the continent. Africa has the least per capita consumption of refined products, and this structural gap is one which the refinery and its planned expansions are racing to meet.

Additionally, the pace of the energy transition is not as rapid as policymakers had hoped. Tack on geopolitical upheavals that can distort the assumptions of an orderly world on which energy transition policies were conceived. Against this backdrop, it is not inconceivable to see a market shrinking slower than expected. 

Further, air transport also has not shown itself amenable to commercial-level electrification yet. There is still a requirement for Jet A1 fuel, even if regulations require its blending with aviation-type biofuels for compliance with climate targets.

Recall also that European refineries have been shutting down and that capacity cannot be rapidly restored. To the extent that there is still a European market, albeit one that is shrinking slowly, Dangote Refinery will help satisfy its demand. Taking these points into account, the broader issue is the relevance of the refinery beyond the European market, which is not “greening” as quickly and as uniformly across energy demand sectors as it had hoped.

Question: What would you say is the single biggest challenge Dangote faces in maintaining its momentum as a large-scale exporter to Europe and beyond?

Dr. Kaase Gbakon: Maintaining Dangote Refinery’s momentum of large-scale exports and domestic supply will require a sustainable supply of crude feedstock at commercially acceptable prices. Even after the refinery resolves its raw material challenge, it will have to compete with the Atlantic basin-facing North American refineries for exports into Europe. Specifically, there is about 10 million bpd of US Gulf Coast (USGC) refining capacity in America that exports its excess product into Central and South America and Europe.

To appreciate the scale of the feedstock challenge, consider that the capacity of the Dangote refinery at 650 million bpd is already 50–60% of Nigeria’s total production. Further, Nigeria’s production has only started a slow, painful recovery from a 10+ year run of sustained decline from its 2005 peak.

Due to equity business arrangements, crude quality and prior financial obligations, it is recognized that not all domestic production can feed the refinery. Thus, from a pure accounting perspective, it is obvious that the refinery cannot source all its crude requirements domestically. A refinery of that size and complexity would need to look beyond the African continent for a diverse feedstock palette to optimize plant yields.

It is in recognition of these challenges that the refinery works to secure long-term supply arrangements while it seeks to double its capacity to 1.4 million bpd to help it compete against USGC refiners. This will also help it strategically move to establish the East African refinery and capture East and South African markets, displacing Asian refiners’ supplies. Dangote’s biggest constraint is securing enough competitively priced crude to feed an exceptionally large refinery.

Question: Lastly, how does Nigeria stand to benefit from Dangote’s momentum? What steps should the government take to help the national economy grow alongside the thriving company?

Dr. Kaase Gbakon: The benefits to Nigeria would include availability of refined petroleum products, access to industrial sources of energy, increase in the GDP, an improvement in the terms of trade and retention of value within the economy. A key area the government can help the economy grow is to provide certainty around its energy and fiscal policies, enabling the refinery to make long-term business plans. To promote growth, Nigeria should also encourage upstream oil production to support the refinery’s feedstock requirements.

Dangote refinery cannot solve the global fuel crisis. However, its scale means that Africa now has a refinery large enough to participate meaningfully in global product markets while simultaneously reshaping regional fuel trade.

[Aliyah A. Omar edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.