Nigerian billionaire Aliko Dangote, Africa’s richest man and industrial titan, has issued a stark warning: a deluge of discounted Russian petroleum products is inundating African markets, posing a significant threat to the continent’s nascent and emerging refining industry. This influx, driven by Western sanctions on Moscow, risks undermining Africa’s long-held ambition for energy self-sufficiency and could have profound implications for the quality of fuels consumed across the continent.

Despite Africa producing approximately 7 million barrels of crude oil per day, a paradoxical reality persists: only about 40% of its consumption of refined petroleum products is processed locally. The continent still grapples with a massive annual import bill of over 120 million metric tons of refined products, a dependency that drains foreign exchange reserves and exports jobs. Dangote’s concerns highlight a critical juncture for African energy policy, as the continent navigates global geopolitical shifts while striving to build robust domestic industrial capacity.

The Dangote Refinery: A Beacon of African Ambition Facing Headwinds

At the heart of this unfolding challenge is the Dangote Petroleum Refinery, a colossal $20 billion facility on the outskirts of Lagos, Nigeria. Commissioned in 2023, it stands as Africa’s largest single-train refinery, with an initial capacity of 650,000 barrels per day (bpd), with an ambitious plan to expand to 700,000 bpd. This mega-project was envisioned as a game-changer, capable of transforming Nigeria from a net importer of refined petroleum products into a net exporter, thereby boosting the nation’s economy and contributing significantly to regional energy security.

However, despite its immense scale and strategic importance, the Dangote Refinery has faced an uphill battle in securing consistent crude supplies locally. Aliko Dangote himself revealed at an oil conference in Abuja that International Oil Companies (IOCs) have been the “biggest obstacle” to crude supply. He lamented that rather than being able to purchase crude directly from Nigerian producers at competitive terms, his refinery has been compelled to negotiate with international trading companies who acquire Nigerian crude and then resell it to the refinery at “hefty premiums.” This convoluted supply chain forces the Dangote Refinery to import a staggering 9 to 10 million barrels of crude oil monthly from countries as far as the United States and Europe.

Dangote further detailed the operational hurdles, accusing upstream operators of consistently delaying lifting schedules and imposing “excessive port and regulatory charges.” These challenges forced the Dangote Group to take on the role of Engineering, Procurement, and Construction (EPC) contractors themselves for significant portions of the project. This included importing over 150,000 containers and 2,600 heavy equipment units, and even building a dedicated seaport, because over 60% of the refinery’s components could not pass through existing Nigerian ports. These revelations underscore the deep-seated structural and logistical impediments that can hinder large-scale industrial projects in Africa, even when backed by immense private capital.

Despite these formidable obstacles, the Dangote Refinery has already begun to make its mark on the market. Since June, it has successfully exported 1 million tons of petrol, a significant milestone that demonstrates its operational capability and potential to alleviate Africa’s reliance on imported fuels. This achievement, however, is now threatened by external market dynamics.

The Russian Influx: Cheap Products and Substandard Quality

Dangote’s primary concern stems from the “dumping of cheap, often toxic petroleum products” into African markets. He explicitly attributed this trend to Western sanctions on Russian oil, which have compelled Moscow to seek alternative markets for its vast energy exports. Following Russia’s actions in Ukraine, Western nations, particularly the G7 and the European Union, implemented a series of stringent sanctions aimed at limiting Russia’s oil revenues. These measures include a price cap on Russian seaborne crude oil (recently lowered from $60 to $47.6 per barrel, effective September 3) and restrictions on vessels transporting Russian oil.

In response, Russia has strategically pivoted its oil exports eastward, with China and India becoming dominant buyers. However, Africa has also emerged as a significant, albeit smaller, alternative market for Russian refined products. The discounts offered by Russia, desperate to maintain market share and revenue streams, make these products highly attractive to African importers, many of whom are struggling with high energy costs and limited foreign exchange.

The more alarming aspect, according to Dangote, is the quality of these discounted products. He warned that some are “blended to substandard levels that would never be allowed in Europe or North America.” This raises serious concerns about environmental pollution, engine damage, and public health, as lower-quality fuels often contain higher levels of sulfur and other harmful contaminants. While many African countries have their own fuel quality standards, the “regulatory gaps and inconsistent fuel standards across African countries” create vulnerabilities that international traders can exploit, allowing these substandard products to enter the market.

The Shadowy Influence of the Lomé Floating Oil Market

Adding another layer of complexity to the challenge is the Lomé floating oil market off the coast of Togo. Dangote described this as a “uniquely African phenomenon” and a “fraudulent floating market” dominated by international traders. This offshore hub reportedly stores over 2 million barrels of petroleum products, serving as a key point for fuel imports into the West African region.

Dangote explicitly stated that these international traders were selling products at “inflated prices due to the absence of local refining capacity.” However, the moment the Dangote Refinery came on stream, these traders “slashed prices to maintain their grip.” This aggressive pricing strategy is a direct attempt to undercut local refining efforts and protect the entrenched profits of these international players. Dangote warned that these “entrenched interests” behind the offshore Lomé fuel trade are the “greatest obstacle to Africa’s quest for refining self-sufficiency,” and they “will do everything they can to prevent other refineries from emerging.” This highlights a significant challenge of rent-seeking behavior and corruption within the petroleum value chain across many African countries, which historically has been a major avenue for illicit gains.

Africa’s Refining Deficit: A $90 Billion Opportunity Lost

The broader context for Dangote’s warning is Africa’s persistent and economically illogical reliance on imported refined petroleum products. As he pointed out, while Africa produces around 7 million bpd of crude, it only refines about 40% of its 4.3 million bpd consumption locally. This stands in stark contrast to regions like Europe and Asia, which refine approximately 95% of their consumption.

This massive refining deficit translates into Africa losing an estimated $90 billion annually to fuel imports. This financial outflow represents a significant drain on the continent’s foreign exchange reserves, weakens national currencies, and exacerbates economic vulnerabilities. More critically, it means Africa is “effectively exporting jobs and importing poverty into our continent,” as Dangote succinctly put it. The continent is missing out on immense opportunities for job creation, industrial growth, and value addition that would come from processing its own crude oil.

Historically, Africa’s refining capacity has been hampered by a myriad of challenges:

• Underinvestment: A lack of consistent, large-scale investment in new refinery construction and maintenance of existing facilities.
• Aging Infrastructure: Many existing refineries are old, inefficient, and operate below capacity due to lack of upgrades and proper maintenance.
• Mismanagement and Corruption: Issues of governance and transparency have often plagued state-owned refineries.
• Inconsistent Crude Supply: Even for existing refineries, securing reliable and competitively priced local crude can be a challenge, as evidenced by Dangote’s experience.
• Fragmented Markets: Diverse fuel specifications and regulatory frameworks across African countries create barriers to intra-African trade in refined products, benefiting external traders who thrive on arbitrage.

While there has been some growth in regional fuel supply in West Africa, with a current capacity of 1.335 million bpd, imports still account for 69% of the 2.05 million metric tons per month of gasoline traded in the region, with local refineries contributing only 31%. This stark imbalance underscores the urgency of addressing the refining deficit.

Policy Prescriptions: Tariffs, Emissions Caps, and Harmonization

To counter the dumping of cheap, substandard products and protect domestic refining capacity, Dangote urged African governments to adopt measures similar to those employed in developed economies like the United States, Canada, and Europe. Specifically, he called for the implementation of tariffs and emissions caps.

• Tariffs: Imposing import duties on refined petroleum products would make foreign imports more expensive, thereby leveling the playing field for locally refined fuels. This would provide a competitive advantage to African refineries, encouraging investment and increasing their market share.
• Emissions Caps and Stricter Standards: Implementing stringent fuel quality and emissions standards, similar to those in Europe and North America, would effectively block the entry of substandard and “toxic” products. This would not only protect domestic refiners from unfair competition but also safeguard public health and the environment. Harmonizing these standards across the continent is crucial to create a unified market and prevent arbitrage.

Beyond these specific measures, a broader policy framework is needed. Dangote challenged African governments to do more than just issue refinery licenses; they must “enforce compliance” and create a truly supportive environment for local industrialization. This includes addressing the “entrenched rent-seeking” behavior within the petroleum value chain that actively frustrates local efforts.

The African Union’s energy policy goals emphasize achieving accessible, affordable, reliable, and sustainable energy for the continent. The African Energy Commission (AFREC) is mandated to develop the African energy sector through coordination and harmonization. Their ongoing work on a Continental Energy Security Policy Framework, which includes promoting energy efficiency and low-carbon pathways, aligns with the need for robust regulatory measures to protect emerging industries. The mobilization of domestic and private sector resources is essential for achieving energy independence and resilience, and this requires a coherent and supportive policy environment.

Contextualizing Russian Oil Exports to Africa

While Dangote’s concerns are valid and pressing for the African refining sector, it’s important to contextualize the scale of Russian oil product exports to the continent. Africa remains a relatively small market for Russian oil products compared to major buyers like Turkey and Brazil, which have significantly increased their imports of discounted Russian crude and refined products.

Recent shipping data indicates that Russian diesel and gasoil exports to African countries saw a 30% drop in June from the previous month, totaling about 0.7 million tons. Morocco, Tunisia, Togo, and Egypt were among the largest importers during this period. The reasons for these imports vary; some countries may lack sufficient refining capacity, while others might be taking advantage of the steep discounts to secure cheaper energy.

The phenomenon of vessels loaded with Russian diesel having their destinations marked as “for orders” (about 230,000 tons in May) highlights the opaque nature of some of these transactions. This practice indicates that final discharge points are not declared or are not yet determined, making it challenging to track the ultimate destination and consumption of these products. This lack of transparency can further complicate regulatory oversight and the enforcement of quality standards.

Despite the recent dip in exports to Africa, overall Russian fossil fuel export revenues saw a 4% month-on-month rise in June 2025 to EUR 593 million per day, driven by a rebound in oil prices and export volumes. Furthermore, G7+ tankers are reportedly regaining their share in transporting Russian oil, accounting for 56% in June 2025, up from 36% in January. This suggests a complex and evolving global oil market where sanctions are constantly being navigated and new trade routes established.

Broader Implications and Africa’s Energy Future

Aliko Dangote’s warning is a critical call to action for African governments and policymakers. The continent stands at a crossroads: it can either continue to be a dumping ground for cheap, potentially harmful, and substandard refined products, or it can take decisive steps to protect and nurture its nascent refining industry.

The long-term vision for Africa’s energy future involves not just self-sufficiency in refining but also a diversified energy mix that includes significant investments in renewable energy. However, the immediate challenge of protecting existing and emerging refining capacity is paramount for economic stability and industrialization.

The geopolitical implications are also significant. Russia’s pivot to African markets for its energy exports creates new dynamics, offering some African nations cheaper fuel but also potentially undermining their long-term industrial ambitions. African leaders must balance the short-term benefits of discounted imports with the strategic imperative of fostering local production, creating jobs, and ensuring energy security.

Ultimately, the ability of African governments to adopt coherent, harmonized energy policies, enforce stringent quality standards, and create a truly supportive environment for domestic refiners will determine whether the continent can truly unlock its $90 billion market opportunity and achieve genuine energy independence. The Dangote Refinery, a symbol of African industrial ambition, serves as a vivid reminder of both the immense potential and the formidable challenges that lie ahead.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

23rd July, 2025