Why Dangote Is Buying U.S. Crude—and What It Means for Pump Prices

In May 2023, Nigeria inaugurated the Dangote Refinery, a monumental $20 billion project situated in the Lekki Free Trade Zone, Lagos. With a processing capacity of 650,000 barrels per day (bpd), it stands as the largest single-train refinery globally. This facility was envisioned to transform Nigeria’s energy sector by reducing the nation’s reliance on imported refined petroleum products. However, a surprising development has emerged: despite Nigeria’s status as a major crude oil producer, the Dangote Refinery has been importing substantial quantities of U.S. West Texas Intermediate (WTI) crude oil. In July 2025 alone, the refinery is set to import at least five million barrels of WTI crude, following a record-breaking 300,000 bpd in June. This trend raises pertinent questions: Why is Nigeria, rich in its own crude resources, turning to U.S. imports? What implications does this have for domestic fuel prices and the broader economy? This article delves into the reasons behind the Dangote Refinery’s shift towards WTI imports, examining the characteristics of WTI crude, the challenges within Nigeria’s oil production landscape, and the potential impacts on fuel pricing and economic stability.

The Dangote Refinery: A Brief Overview

Nestled within the Lekki Free Trade Zone in Lagos, Nigeria, the Dangote Refinery stands as a monumental achievement in Africa’s energy sector. With a processing capacity of 650,000 barrels per day (bpd), it holds the distinction of being the largest single-train refinery globally. This $20 billion facility was envisioned to transform Nigeria’s oil industry by reducing the nation’s dependency on imported refined petroleum products and addressing long-standing inefficiencies in the sector. The refinery’s inception was driven by the need to tackle the challenges posed by Nigeria’s underperforming state-run refineries, which have historically suffered from poor maintenance and operational inefficiencies. By establishing a privately owned and operated facility, the Dangote Group aimed to harness Nigeria’s abundant crude oil resources to produce refined products domestically, thereby enhancing energy security and fostering economic growth.

Since commencing operations, the Dangote Refinery has made significant strides in ramping up its production capabilities. Initial outputs included diesel and aviation fuel, with plans to commence gasoline production in the near future. The refinery’s advanced infrastructure and technology enable it to process a diverse range of crude oil grades, positioning it as a pivotal player in both regional and global energy markets. However, the journey has not been without challenges. Securing a consistent and adequate supply of crude oil feedstock has proven to be a significant hurdle. Despite Nigeria’s status as a major oil producer, the refinery has faced difficulties in sourcing sufficient domestic crude, leading to the importation of foreign crude oil grades, including the U.S. West Texas Intermediate (WTI). This strategic move underscores the complexities of Nigeria’s oil supply dynamics and the refinery’s commitment to maintaining optimal operational levels.

In summary, the Dangote Refinery represents a bold and transformative initiative aimed at reshaping Nigeria’s energy landscape. Its establishment marks a critical step towards achieving self-sufficiency in refined petroleum products, stimulating economic development, and asserting Nigeria’s position in the global oil industry.

Understanding WTI Crude and Its Appeal

To grasp the rationale behind the Dangote Refinery’s decision to import U.S. West Texas Intermediate (WTI) crude oil, it’s essential to understand the characteristics of WTI and how it compares to Nigeria’s domestic crude oil grades.

Characteristics of WTI Crude

WTI is a high-quality crude oil known for its lightness and low sulfur content. These properties make it particularly desirable for refining into gasoline and other high-value products. The lightness refers to its low density, and the low sulfur content classifies it as “sweet” crude, both of which contribute to lower refining costs and higher yields of desirable products.

Comparison with Nigerian Crude

Nigeria produces several crude oil grades, including Bonny Light, Forcados, and Qua Iboe, which are also light and sweet. However, despite the similarities, WTI has become an attractive option for the Dangote Refinery for several reasons:

• Cost-Effectiveness: WTI has been priced more competitively compared to Nigerian grades. For instance, in 2023, Bonga crude was priced at a $6 per barrel premium over WTI, making WTI a more economical choice for refiners seeking to optimize margins.
• Supply Reliability: The U.S. has a well-developed infrastructure for crude oil production and export, ensuring a steady and reliable supply of WTI. In contrast, Nigeria’s oil production has faced challenges such as pipeline vandalism and theft, leading to supply disruptions.
• Strategic Diversification: By incorporating WTI into its feedstock, the Dangote Refinery diversifies its crude supply sources, reducing dependence on any single region and enhancing operational resilience.

The decision to import WTI allows the Dangote Refinery to maintain optimal operations despite domestic supply constraints. It also positions the refinery to take advantage of favorable pricing and supply stability, which are crucial for its profitability and sustainability.

In summary, while Nigeria’s crude oil grades are of high quality, the economic and logistical advantages of WTI make it a compelling choice for the Dangote Refinery. This strategic move underscores the complex considerations that modern refineries must navigate in a globalized oil market.

Reasons Behind Dangote’s WTI Imports

The decision by Nigeria’s Dangote Refinery to import U.S. West Texas Intermediate (WTI) crude oil, despite the country’s substantial domestic crude reserves, is influenced by a combination of factors. These include domestic supply constraints, economic considerations, and strategic diversification efforts.

Domestic Supply Constraints

Nigeria’s crude oil production has experienced a significant decline over the years. From a peak of 2.52 million barrels per day (bpd) in 2005, production dropped to approximately 1.14 million bpd by 2022. This decline is attributed to various challenges, including pipeline vandalism, oil theft, and underinvestment in the sector.

The Dangote Refinery, with a capacity of 650,000 bpd, requires a consistent and substantial supply of crude oil to operate efficiently. However, the domestic supply has been insufficient to meet the refinery’s needs. As a result, the refinery has turned to international markets to source additional crude oil, including WTI from the United States.

Economic Considerations

The cost-effectiveness of importing WTI crude plays a significant role in the refinery’s decision-making process. In 2023, Nigeria’s Bonga crude was priced at a $6 per barrel premium over WTI, making WTI a more economical option for the refinery.

Additionally, the reliability and stability of supply from the U.S. market offer economic advantages. The U.S. has a well-developed infrastructure for crude oil production and export, ensuring a steady and reliable supply of WTI. This contrasts with the challenges faced in Nigeria’s oil production landscape, where supply disruptions are more common.