Nigeria’s Refining Sector Posts Biggest Growth as Dangote Ramps Up Output

Nigeria’s oil refining sector expanded by 37.46 percent in the first quarter of 2026, the strongest growth recorded by any sector during the period, highlighting the growing economic impact of the Dangote Refinery on the country’s industrial landscape.

According to a report by the Centre for the Promotion of Private Enterprise (CPPE), the exceptional performance of the refining sector reflects how large-scale domestic refining is beginning to reshape Nigeria’s energy ecosystem, strengthen local value addition and reduce dependence on imported petroleum products.

“This remarkable performance underscores the transformative potential of domestic refining in advancing energy security, deepening import substitution, accelerating industrialisation and conserving foreign exchange,” the Lagos-based economic think tank said.

CPPE noted that the growth was driven largely by the ramp-up in operations at the Dangote Refinery, while elevated regional and global demand for refined petroleum products also supported output amid persistent geopolitical tensions in the Middle East and disruptions in global energy markets.

The report highlights the increasing strategic importance of domestic refining to Nigeria’s broader economic recovery efforts as policymakers seek to conserve foreign exchange and improve industrial productivity.

Beyond refining, other industrial segments also posted strong growth. Quarrying and minerals expanded by 23.41 percent, while the cement sector grew by 11.53 percent, reflecting sustained construction activity across the economy.

Electricity sector contracts sharply

Despite the strong performance in refining and construction-linked industries, CPPE warned that the sharp contraction in the electricity and gas sector remains a major threat to economic sustainability.

The electricity sector shrank by 15.30 percent in the first quarter, making it the weakest-performing sector of the economy and marking one of the steepest contractions recorded in recent years.

According to CPPE, the decline exposes deep structural weaknesses across power generation, transmission and distribution, alongside persistent liquidity and governance challenges in the sector.

“This development is concerning because electricity is not merely another economic sector; it is the foundation upon which productivity, industrialisation, competitiveness and inclusive growth depend,” the report said.

“A contraction of this magnitude signals persistent structural weaknesses across generation, transmission and distribution, as well as continuing liquidity and governance challenges within the power sector.”

The think tank noted that worsening electricity supply is further increasing production costs for businesses already struggling with high interest rates, weak consumer purchasing power and elevated logistics expenses.

Heavy reliance on diesel and petrol-powered self-generation continues to erode profitability across manufacturing, hospitality, agro-processing, SMEs and digital businesses, it added.

CPPE stressed that sustainable economic transformation cannot be achieved without reliable and affordable electricity infrastructure, warning that gains recorded in other sectors may prove difficult to sustain if power sector challenges persist.

The group called for accelerated reforms across the electricity value chain, including stronger investment in transmission infrastructure, improved market liquidity, faster metering deployment, reduction in technical and commercial losses, and governance reforms capable of restoring investor confidence.

Economy grows at fastest pace in a decade

Nigeria’s economy grew by 3.89 percent year-on-year in the first quarter of 2026, compared with 3.13 percent in the corresponding period of 2025, according to the report.

Although slightly below the 4.0 percent growth recorded in the fourth quarter of last year, CPPE said the performance reflects improving macroeconomic stability, recovering business confidence and resilience across key non-oil sectors.

“The moderation relative to the preceding quarter is not unusual, as first-quarter economic activities are typically softer because of seasonal and business cycle factors,” CPPE said. “Overall, the economy remains on a gradual recovery path.”

One of the major highlights of the report was the emergence of the trade sector as the single largest contributor to GDP at 17.89 percent.

According to CPPE, this reflects the positive impact of exchange rate stability, improved foreign exchange liquidity, easing inflationary pressures and recovering business confidence on trade activities.

However, the group warned that commerce alone cannot drive long-term economic transformation.

“Long-term growth resilience requires stronger productive capacity, deeper industrialisation and significantly higher domestic value addition,” the report said.

The non-oil sector accounted for 96.08 percent of GDP, while the oil sector contributed just 3.92 percent.

However, CPPE noted that a major structural imbalance persists, as the non-oil economy — despite contributing more than 96 percent of GDP — generates less than 15 percent of the country’s foreign exchange earnings.

According to Muda Yusuf, founder and chief executive officer of CPPE, the latest GDP figures show an economy supported by resilient services, trade, digital activities, construction and expanding domestic refining capacity, but still weighed down by structural weaknesses.

“The next phase of economic reform should therefore focus more deliberately on productivity enhancement, industrialisation, power sector reforms, export competitiveness and inclusive growth,” Yusuf said.

“These remain the critical foundations for sustainable economic transformation and improved welfare outcomes for Nigerians.”