Owners of depots throughout Nigeria are becoming more apprehensive due to escalating investment risks and the threat of job redundancies as the country enhances its local refining capabilities, leading to a gradual obsolescence of the previously dominant importation model for fuel.
Experts in the industry indicate that operators of depots—traditionally focused on storing and distributing imported oil products—are now confronting challenges as domestic refining operations gain traction, notably with the significant investment in the Dangote Refinery.
Many depot operators are increasingly worried about their survival, given that large-scale storage of products, once a fundamental aspect of the downstream oil sector, is quickly being replaced by a supply chain model that relies on local refining.
Analysts speaking to Daily Trust pointed out that the establishment of the Dangote Refinery, which processes 650,000 barrels a day, is the most significant disruptive force on depot businesses and the importation of petroleum products in Nigeria’s history, fostering price rivalry and diminishing the profitability that previously supported depot operators.
By early last year, Nigeria's total operational refining capacity reached approximately 974,500 barrels per day, with the Dangote Refinery making up about 67% of this capacity, supplemented by refurbished state-owned refineries and several modular facilities.
The Dangote Refinery contributes between 50 and 53 million liters of petrol daily to the domestic market, substantially decreasing reliance on imported fuels.
Despite this advancement, petrol imports constituted about 62.47% of Nigeria's overall consumption of Premium Motor Spirit (PMS) in 2025, although industry stakeholders claim that this percentage is declining swiftly.
The Crude Oil Refiners Association of Nigeria (CORAN) has consistently maintained that its members have the ability to satisfy national fuel demands without the need for imports, and the Independent Petroleum Marketers Association of Nigeria (IPMAN) has escalated its opposition to fuel importation.
In a serious caution last year, billionaire entrepreneur and chairman of Geregu Power Plc, Mr. Femi Otedola, alerted members of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) to adapt away from storage systems constructed for an import-driven economy.
Otedola urged depot proprietors to concentrate on retail distribution and last-mile logistics, asserting that the sizable tanks designed for importation are increasingly becoming obsolete in the era of local refining.
"DAPPMAN members should concentrate on establishing and enhancing last-mile retail locations instead of clinging to tanks created for a fuel import economy that is no longer relevant," he stated.
Otedola elaborated that global examples demonstrate that depots in locations like Amsterdam or Houston were established for export markets, particularly Africa. With Nigeria’s shift to local refining, maintaining such infrastructure is becoming less critical. He warned that without adaptation, DAPPMAN members risk becoming irrelevant and possibly facing bankruptcy.
He also suggested that DAPPMAN members should contemplate selling, restructuring, or investing in new value chains, even mentioning a collaborative acquisition of the Port Harcourt Refinery if competition is genuinely valued.
Otedola noted that globally, refinery operators are downsizing depot holdings, transforming facilities into bonded warehouses, or exiting the sector entirely.
The observant industry figure remarked that the Folawiyo Group, recognized for its vision and integrity, sold its depot and exited the market early, exemplifying strategic foresight.
According to him, while DAPPMAN had its role, its significance is quickly diminishing. He emphasized the necessity to let go of outdated advantages and embrace a new age focused on self-sufficiency, transparency, and sustainable value generation.
A source related to depot operators communicated to Daily Trust that the current market dynamics have posed significant challenges.
"It is a stark reality that if this trend continues, numerous depot operators may have to cease operations and explore alternative business avenues," the source indicated.
"If marketers begin loading directly from the Dangote Refinery, the average depot operator will find themselves with little to do. What will happen to the staff? The logistics of trucking and vessel receipt demand substantial human and material resources, which may no longer be needed if depots are overlooked."
The source added that the situation has been exacerbated by the lack of petrol import permits, significantly diminishing depot utilization.
Attempts to obtain remarks from DAPPMAN spokesman, Olufemi Adewole, were unsuccessful, as calls and messages went unanswered.
Industry analysts describe the rise of the Dangote Refinery as a fundamental alteration rather than a fleeting disruption.
For years, DAPPMAN members constructed their businesses around imports, including vessel charters, foreign exchange risks, depot storage, and profit margins on imported PMS and AGO. Analysts argue that this model is now under immense pressure as domestic supply rapidly expands.
"The dangers of downsizing in the near term are tangible, especially in import logistics, shipping agency services, and underutilized depots," remarked another industry insider to Daily Trust.
"As imports diminish, certain assets and roles will undoubtedly be impacted. Nonetheless, this is a necessary adjustment. Nigeria cannot perpetually hemorrhage foreign currency on fuel imports when domestic refining capabilities are finally becoming available."
Observers contend that what depot operators face is not merely a cyclical downturn but a systematic market shift sparked by the scale of local refining, cost competitiveness, and the reconfiguration of logistics.
"Many depots were established on an import-reliant framework upheld by regulatory protections and policy distortions. This business model is largely outdated now," stated another source.
"Markets evolve and are directed by fundamental principles. What we are witnessing is not a market failure but a delayed market adjustment."
Professor Wumi Iledare, a petroleum economist, asserted that the survival of depot owners hinges on reorientation instead of resistance.
He recommended that operators transition from import storage to domestic product logistics, regional distribution, blending services, and strategic storage of petroleum products.
"Utilizing current depots to store locally refined products to ensure energy security is practical and economically viable," he explained.
"While some consolidation and repurposing of assets are inevitable, the true issue is not downsizing; it's the failure to adapt. Ultimately, a domestic- focused downstream market will prove more effective, resilient, and sustainable."
Energy analyst Kunle Odusola also encouraged DAPPMAN members to adapt as strong local distributors through direct sourcing from the Dangote Refinery, trucking, retail networks, and last-mile logistics.
"Depots do not have to become obsolete," he stated. "They can be converted into storage points for locally refined products, as well as facilities for LPG or CNG, blending stations, or distribution points. Policy support will be crucial."
Odusola further recommended that depot owners diversify into gas, lubricants, petrochemicals, and electric vehicle infrastructure, pointing out that Nigeria's Decade of Gas provides substantial opportunities.
Mr. Rasheed Adeleke, CEO of Komotek Enterprises, echoed similar sentiments, emphasizing that adaptability will determine the future relevance of depot owners.
"The dynamics of the industry have transformed," he remarked. "Those who embrace the new reality will thrive and stay relevant, while those who resist the old import model may find it difficult."
As Nigeria’s downstream sector experiences a major shift, stakeholders agree that while the transition might be difficult, the long-term advantages, including increased energy security, foreign exchange savings, and a more robust economy, far outweigh the short-term disruptions.
An industry analyst summarized it well: "This is not the termination of the downstream sector. It is a reset. Those who adjust promptly will not only survive but will also flourish."
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