Africa turns to Aliko Dangote’s $20 billion refinery as Middle East crisis deepens

Nigerian billionaire Aliko Dangote is finding fresh demand for fuel from across Africa as supply concerns ripple through global markets following tensions involving Iran. His $20 billion refinery on the outskirts of Lagos is now drawing interest from governments looking for more reliable supply, with officials in South Africa and others opening talks.

South Africa is seeking a 12-month supply deal with Nigeria, according to people familiar with the discussions, as it moves to reduce reliance on imports from the Middle East. The pressure is not limited to Africa. From cooking gas shortages in India to tighter naphtha supply in Japan, disruptions linked to the conflict have exposed how quickly supply chains can tighten.

The impact in Africa is more pronounced. About 75 percent of refined fuel imports in East and Southern Africa come from the Middle East, according to energy consultancy CITAC. In a statement, South Africa said it is working with industry players to secure crude and refined products from a wider range of sources and has put measures in place to manage supply risks.

Dangote refinery prioritizes Nigeria supply

Dangote said demand has shifted sharply. “Right now, it is not about pricing; it is about availability,” he said, adding that the situation may persist. His 650,000-barrel-per-day refinery allocates about 75 percent of output to Nigeria, leaving the rest for export. Countries including Ghana and Kenya have also made enquiries.

For now, governments say there is no immediate shortage. South Africa said it has enough supply for the coming weeks, while Kenya requires marketers to hold at least three weeks of stock. By comparison, the International Energy Agency recommends reserves covering 90 days of net imports, a threshold no African country currently meets.

Elsewhere, the strain is becoming visible. Authorities in Ethiopia have asked fuel stations to prioritize public transport and urged citizens to conserve energy. In Mogadishu, fuel prices have nearly doubled, underscoring how quickly costs are rising.

Limited refining capacity heightens fuel supply risks

South Africa holds about 8 million barrels of strategic crude stocks, according to the state-owned Central Energy Fund, but has limited refined fuel reserves. Years of accidents and underinvestment have reduced its refining capacity, leaving the country more dependent on imports. That shift is now being tested.

Some companies are already adjusting, with demand for coal rising as firms look for alternatives. Exxaro Resources said coal prices have climbed about 20 percent to $112 per ton, while transport and insurance costs for exports are also increasing.

Nigeria fuel prices track global markets

In Nigeria, the effects are feeding through to pump prices. Dangote’s refinery has raised petrol prices by 34 percent, increasing the ex-gantry price by N180 ($0.12) to N1,175 ($0.84) per liter. This reflects higher crude costs on international markets, which refiners must now pass on.

Unlike in the past, when fuel prices were heavily subsidized, Nigeria’s current system allows prices to track global movements. For Dangote’s refinery, keeping prices unchanged would have meant absorbing rising crude costs. Instead, the changes show how global events are being felt quickly at home, from government balance sheets to what consumers pay at the pump.