Femi Otedola: Dangote Refinery at 650,000 BPD Could Strengthen the Naira and Transform Nigeria’s FX Market

Nigerian billionaire investor Femi Otedola has expressed strong optimism that the Dangote Refinery’s ramp-up to its full installed capacity of 650,000 barrels per day (bpd) could significantly reduce Nigeria’s reliance on imported fuel and ease sustained pressure on the foreign exchange (FX) market.

With domestic petrol supply projected to reach up to 75 million litres per day, Otedola believes the structural shift toward local refining may play a decisive role in stabilizing the naira and potentially driving the exchange rate below ₦1,000 per dollar before year-end.

Import Substitution and FX Demand Reduction

For decades, Nigeria has paradoxically exported crude oil while importing refined petroleum products. This structural imbalance has created persistent FX demand, as marketers required large volumes of U.S. dollars to finance fuel imports.

Fuel importation has historically accounted for a significant portion of Nigeria’s:

• FX outflows

• Pressure on the Central Bank’s reserves

• Exchange rate volatility

• Balance of payments constraints

With the Dangote Refinery now operating at full 650,000 bpd capacity and supplying up to 75 million litres of petrol daily, Nigeria’s dependency on foreign refineries is expected to decline sharply.

Reduced fuel imports directly translate into:

• Lower dollar demand from petroleum marketers

• Reduced pressure on FX liquidity

• Improved external reserve stability

From a macroeconomic standpoint, this represents a critical step toward structural FX stabilization.

Strengthening the Naira: A Realistic Outlook?

Otedola’s projection that the naira could appreciate below ₦1,000/$ is anchored on basic FX market fundamentals supply and demand.

When a country reduces its import bill, particularly in a high-demand commodity like petrol, it lowers its structural need for foreign currency. If export earnings remain stable and capital inflows improve, the pressure on the domestic currency eases.

Key supporting factors include:

1. Elimination or drastic reduction of petrol import bills

2. Increased local refining capacity

3. Potential export of surplus refined products

4. Improved investor confidence in Nigeria’s industrial capacity

If these variables align, exchange rate stabilization becomes more feasible.

Domestic Refining as an Economic Lever

The Dangote Refinery’s output of 650,000 bpd positions Nigeria as:

• Africa’s largest refining hub

• A potential net exporter of refined petroleum products

• A regional energy supplier to West and Central Africa

Beyond FX implications, domestic refining generates multiplier effects across:

• Maritime logistics

• Storage infrastructure

• Petrochemicals

• Manufacturing inputs

• Employment creation

By refining crude locally, Nigeria captures more value within its borders rather than exporting raw crude and importing finished products at premium prices.

Broader Macroeconomic Implications

If sustained, full-capacity refining could produce several macroeconomic benefits:

1. Lower Inflationary Pressures

Fuel import costs significantly influence transportation and logistics expenses. Reduced import dependency may moderate fuel-related cost pass-through effects.

2. Improved Trade Balance

Reduced petroleum imports combined with potential product exports can improve Nigeria’s trade balance.

3. Enhanced Energy Security

Domestic production reduces vulnerability to global supply chain disruptions.

4. Strengthened Investor Confidence

Large-scale industrial operations signal economic stability and infrastructure readiness, which may attract foreign direct investment.

A Turning Point for Nigeria’s Energy Narrative

Otedola’s optimism reflects a broader sentiment within Nigeria’s business community: that structural industrial investments, rather than short-term monetary interventions, provide the most sustainable path to currency stability.

The Dangote Refinery reaching 650,000 bpd is not merely an operational milestone; it is a macroeconomic inflection point. If the refinery maintains output consistency and domestic distribution efficiency, Nigeria’s FX market could experience meaningful relief.

Conclusion

Femi Otedola’s assessment underscores the strategic importance of local refining in reshaping Nigeria’s economic architecture. With up to 75 million litres of petrol supplied daily and reduced reliance on imports, the FX demand curve may gradually shift in Nigeria’s favor.

While exchange rate dynamics remain influenced by multiple global and domestic variables, the refinery’s full-capacity operation represents a structural reform capable of strengthening the naira and redefining Nigeria’s energy independence.

If effectively managed and sustained, this development could mark the beginning of a more stable, production-driven Nigerian economy  less vulnerable to import shocks and better positioned for long-term currency resilience.