🍞 Dangote vs The Nigerian National Petroleum Company

Hello,

Demilade Here! In case you didn’t read Monday’s edition, we made a few changes. Firstly, from this week, you’ll be getting one newsletter a week, as we focus on more in-depth storytelling. And you’ll be hearing from me a lot more, as Adetomiwa has transitioned to pursue new exciting opportunities.

In today’s edition, explore the battle between Dangote and the NNPC, and the consequences for Nigeria’s economy.

I also added a fun poll at the end!

p.s I wrote this, listening to this track (Spotify), which is ominous and oddly fitting for the economic situation Nigeria finds itself today.

Enjoy, and send me feedback!

Nigeria’s Rockefeller

In 2007, during Obasanjo's last days in office, he led a privatisation push, which auctioned off state-owned assets. In one of these firesales, Bluestar, a consortium led by Aliko Dangote, paid $750 million to acquire 51% in the Port Harcourt and Kaduna refineries. The deal was fiercely opposed by NNPC staff who organised a strike, and was reversed shortly afterwards by incoming President Umaru Musa Yar'Adua. The official reasoning was process irregularity. The political reading was that Dangote had been allowed too close to the state's most strategic asset on terms that favoured him. i.e the low prices. That episode proved a formative lesson for Dangote. Rather than continue trying to buy what already existed, he decided to build his own.

In 2013 Dangote acquired roughly 2,635 hectares of land in the Lekki Free Zone east of Lagos. A great location because it was the cluster of what could be the most important economic hub in West Africa. It has special economic zone status, plans for a new deep-sea port, airport and key stop on Lagos’ new metro and most of all, proximity to offshore crude. The Initial capacity for the refinery was 400,000 barrels per day. And the plan was to be operational by 2016.

The project famously missed its target date. Cost estimates climbed from an initial $9 billion to roughly $12 billion, then to $15 billion, and ultimately to around $20 billion. The funding came from a combination of equity, $5.5 billion of debt syndicated across Nigerian and international banks, and pension funds. Dangote himself put in over $2 billion in the refinery. By then, the capacity was revised upward to 650,000 barrels per day.

Enter NNPC

In 2021, after rejecting him over a decade before, the federal government of Nigeria, through NNPC Limited, agreed to take a 20% stake in the refinery for $2.76 billion. NNPC only paid $1 billion of that commitment and never completed the rest. The shareholding eventually settled at 7.25%, reflecting only what NNPC had actually paid.

One of the main ways NNPC made money was by forward selling crude. Forward selling is as intuitive as it sounds. NNPC made contracts and sold crude it had not yet produced, entering long contracts at a fixed price. The transaction works like this: A group of international banks, traders, or oil majors agrees to pay NNPC a large dollar sum upfront. In exchange, NNPC commits to deliver a specified volume of crude oil over a multi-year period, on a fixed schedule, often at a discount to prevailing market prices.

For Nigeria's balance sheet, this is essentially a secured loan, with future oil production as the collateral. Except it does not appear in headline debt figures because, formally, it is a commercial sale, not borrowing. The country has cash in hand, but it also has fewer barrels available to sell at market in the years ahead.

Since 2019, NNPC Limited has entered into 11 forward crude sale deals worth over $21 billion, with maturity dates running from 2025 to 2034. Including: Project Gazelle ($3.4 billion, maturing 2032) and Project Gazelle II ($7.5 billion, maturing 2034).

There are several problems with this strategy.

One, it commits future production before it happens. Every barrel pre-sold under a forward arrangement is a barrel that cannot be sold at market in the future, and cannot be supplied to future domestic refineries on commercial terms.

Also, most forward sale contracts fix the discount to an oil benchmark, but the cash advance is fixed in dollars. Meaning, if oil prices rise, Nigeria delivers crude at a price below the market and effectively gives up the upside. If oil falls, the discount becomes less generous, but the delivery obligation continues. Forward sales typically lock in the downside without preserving the upside.

It also creates a structural FX paradox. Each forward sale generates immediate dollar inflows that strengthen the naira in the short term. But because the underlying crude has been pre-committed, the corresponding future dollar inflows simply disappear. The naira gets a sugar high today and a withdrawal tomorrow. Over a decade of repeated forward sales, the structural FX position weakens even when reserves can appear healthy.

Finally, and perhaps the one most relevant to this story is, it reduces local refinery supply. Nigerian Domestic Crude Supply Obligations (DCSO) require NNPC to deliver crude to local refineries. But if a substantial share of NNPC's crude is already pre-committed under forward sales, the DCSO becomes harder to satisfy on commercial terms.

So why does the NNPC/Government do this?

First, for immediate liquidity. When oil revenue is needed urgently to fund recurrent expenditure, service existing dollar obligations, or perhaps pay for subsidies, a forward sale generates a large lump sum of cash today. The federal government can spend that lump sum immediately rather than waiting for crude to be produced, lifted, sold, and remitted through the usual channels.

Second, the dollars from forward sales go into reserves or are deployed by the CBN to stabilise the naira. In an import dependent country like Nigeria, where oil exports historically account for the majority of FX inflows, getting dollars in early matters.

Okay, back to the story.

Fighting Partners

The Dangote Refinery opened in early 2024 with a capacity of 650,000 barrels per day, eventually overtaking the four moribund state-owned refineries combined. However, that early operating period was rough. NNPC could not consistently supply Nigerian crude to the refinery (wow so surprised 🙃), forcing Dangote to import crude from the US, Brazil, and Saudi Arabia in dollars.

In July 2024, NDPRA CEO Farouk Ahmed decided that the best way to save face is to go after Dangote, publicly stating that Dangote's diesel was "inferior" to imported products, citing that sulphur was up to 20 times the level of imported diesel in West Africa. The House of Representatives took samples from the refinery on July 20 and ran independent lab tests. Dangote's diesel measured 87.6 ppm sulphur. The imported samples measured between 1,800 and 2,000 ppm. Ahmed's claim was destroyed publicly, and the House passed a resolution demanding his suspension. From this point onward, Dangote believes the regulator is actively working against him and he starts saying so out loud.

Still, by September 2024, NNPC took its first delivery of petrol from the refinery at N898 per litre, but the two parties publicly disagreed over the pricing on day one. Dangote was selling at a dollar equivalent because the crude he had refined was imported in dollars from the US, Brazil, and Saudi Arabia. The NNPC refused to accept that framing. Then President Tinubu brokered a naira-for-crude arrangement, allowing Dangote to buy domestic crude in naira to produce products sold in naira in the domestic market. This was the attempted resolution to the FX problem. Between October 2024 and September 2025, about 82 million barrels of crude were allocated to the refinery, of which 49.3 million (60%) were supplied in naira.

But the fighting hadn’t stopped.

The First Lawsuit

Dangote filed suit in the Abuja Federal High Court, seeking N100 billion in damages from NMDPRA over import licences issued to NNPC and several fuel marketers. He argued the licences violated Sections 317(8) and (9) of the Petroleum Industry Act. The marketers counter-filed in November 2024, accusing Dangote of attempting to monopolise the sector. At the same time, Dangote starts cutting petrol prices repeatedly. Each drop cutting into fuel importers’ margins.

And then, as his final blow, Dangote publicly accuses Farouk Ahmed of living far beyond a civil servant's means, including four of Ahmed's children enrolled at expensive Swiss schools, and files a complaint with the ICPC. Ahmed eventually exits his role. He also labelled Nigerian importers as a ‘mafia’ that was to destroy him.

Things settled down after that. Dangote quietly dropped the lawsuit in late 2025, and the NNPC signed a new supply contract with him. By February 2026, the refinery had reached full capacity, Dangote’s net worth had topped $30 billion and a pan-African, dollar-denominated dividend mega IPO was announced for Sept 2026.

Dangote was heralded internationally and even labelled Nigeria’s Rockefeller.

Tour De Dangote and The Second Lawsuit

As part of his IPO tour, on the In Good Company Podcast with Nicolai Tangen, the CEO of the world's largest sovereign fund. Dangote revealed that he had personally rejected NNPC's bid to increase its stake beyond 7.25%, framing it as a deliberate decision to spread ownership through the IPO instead.

And as if talking about NNPC reminded him of all his grievances, a few days later, his refinery sued the Federal Government in Lagos, asking the court to nullify the import licences NMDPRA had just issued early in the month to NIPCO, AA Rano, Matrix Energy, Shafa Energy, Pinnacle Oil and Gas, and Bono Energy. NNPC counter-filed in May 2026, accusing Dangote of attempting to monopolise Nigeria's fuel market and arguing that he has not provided "credible, independent or verifiable evidence" that the refinery can consistently meet Nigerian fuel demand. The NMDPRA has separately applied to join the case. Court hearings will land in the middle of Dangote's September IPO roadshow.

The issue boils down to this. Nigeria spent decades importing refined petroleum products despite being one of Africa's largest crude producers, and the import bill consistently consumed a third of national FX inflows, leaving the country vulnerable to currency shocks and multiple devaluations in the last two decades. The Dangote Refinery, at full capacity, removes that import bill. In April 2026 its petrol production averaged 53.6 million litres per day, which is more than the national consumption of around 50 million. At the same time, imported petrol fell from 40.1 million litres per day in March to 3.7 million in April. The pressure on the naira has eased materially in tandem.

But that depends on the refinery operating without competing imports undercutting its margins. From Dangote's perspective, an import licence issued while the refinery is producing surplus is the state choosing favoured importers over a domestic producer. From the state's perspective, allowing a single private operator to control nearly all of Nigeria's refined fuel supply means one man holds the price-setting power for the entire downstream sector.

That leads us to today. Africa’s most anticipated IPO, an industrialist perceived as the saving grace of the Nigeria’s economy and the government-backed institution that wants to stop him from becoming a monopoly.

If Dangote wins…

The refinery operates without import pressure. The naira is structurally more stable. Nigeria becomes a net exporter of refined products and a regional fuel hub. Energy independence improves dramatically. However, in exchange, the country has chosen to be subject to a private fuel monopoly. Prices depend almost entirely on Dangote's commercial discretion. Any operational disruption at the refinery, any cyber incident, or a political fallout, is immediately a national fuel crisis. And the wealth created by removing the import bill flows almost entirely to one man rather than being spread across a competitive ecosystem. Unless, of course we all buy in at the IPO.

If NNPC wins.

Imports continue, but multiple fuel marketers stay in business, downstream margins stay disciplined by market forces… In theory. In practice, the import licensing system has historically been the most reliable source of FX leakage, customs fraud, and political sponsorship from the Nigerian downstream sector. The "mafia" Dangote named is not just theoretical. Pricing power just transfers to this cabal, which doesn’t translate to low pump prices. Besides, fuel imported in dollars means the pump prices in Nigeria, an oil-producing country, are affected by exchange rate fluctuations, which the importing itself propagates. In reality, fuel from the Dangote refinery has been cheaper than imported fuel. More importantly, if NNPC wins, Nigeria returns to the status quo.. And that was not a great place to be.

The lesser of two evils

So let’s play a game… Would you rather be energy independent, but your energy security is subject to a benevolent monopolist, or remain an import-dependent country and leave it in the hands of an oligarchy?

⚡ Spiro adds $215 million for African electric mobility: Spiro, the battery-swapping infrastructure company for African motorcycles, has raised $215 million in equity from investors including Impact Fund Denmark and Equitane. Founded in 2022, Spiro has deployed more than 100,000 electric motorcycles and built over 2,500 battery-swapping stations across Kenya, Rwanda, Uganda, Togo, Benin, Nigeria, and Cameroon, with Ethiopia and the DRC as the next markets, and a battery recycling facility. (Techcabal)

🌱 Southern Nigeria has the founders, not the capital: The 2025 South-South and South-East Startup Ecosystem report tracked 304 companies across 11 states between 2023 and 2025, with disclosed funding of $10.23 million, up 29.6%. Out of the 304 companies tracked, 6 account for 86.6% of all disclosed capital, leaving the median raise across the broader ecosystem at just $500. Nearly 70% of talent with digital skills in the region are unemployed or freelancing, and of those working remotely, roughly two-thirds are employed by companies based outside the region, primarily in Lagos and international markets. Translation: the region is producing talent at scale, but lacks the capital and local employers needed to absorb them. (Nairametrics)

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