Banks Count $2.8 Billion Loss As Nigeria’s Fuel Imports Collapse
By OBI DAVIES
NIGERIA’S banking sector is grappling with a major shake-up as the country’s fuel imports fall sharply, wiping out a significant source of profit for lenders that have long dominated petroleum trade financing.
Fresh data from the National Bureau of Statistics (NBS) show that mineral fuel imports plunged to ₦4.4 trillion in the second quarter of 2025, compared to ₦5.9 trillion in the same period of 2024. In dollar terms, the drop is even steeper—$2.8 billion against $4.3 billion in Q2 2024.
This marks a turning point for an economy that has depended on imported petroleum products for decades. The ramp-up of the 650,000-barrel-per-day Dangote Refinery is dramatically cutting import volumes, transforming the fuel trade and reshaping the fortunes of Nigeria’s commercial banks.
End of an Era for Trade Finance
For years, petroleum imports were Nigeria’s single largest import category, and banks reaped huge profits from financing the transactions. Lenders earned on every step—arranging letters of credit, providing offshore guarantees, facilitating forward FX contracts, and converting naira proceeds into dollars.
Now, as fewer cargoes of petrol and diesel arrive, those dependable revenue streams are drying up. Analysts warn that banks heavily tied to oil-trading clients face a weakening top line unless they diversify quickly.
“It’s not just the loans themselves but the cascade of fees—advisory, documentation, currency hedging. All that narrows when fewer ships dock with imported fuel,” explained Ijeoma Anaba, a petroleum-sector consultant in Abuja.
Some of the country’s largest banks have already reported softer trade-finance income this year, a signal that the shift is underway.
FX Market Eases, Naira Finds Stability
While banks are feeling the pinch, the broader economy is benefiting. Fuel importers were among Nigeria’s biggest buyers of dollars, often crowding out other sectors and putting enormous pressure on the Central Bank of Nigeria (CBN).
With demand easing, the naira has shown greater stability, reducing the volatility that previously rattled financial markets. For banks, this stability lowers the risk of revaluation losses on foreign-currency liabilities and reduces the cost of hedging against sudden swings.
“The naira’s stability feeds directly into banks’ capital ratios and earnings,” said Adeyemi Oke, an analyst at Lagos-based MacroWatch. “It improves planning for everything from loan pricing to treasury operations.”
Pivot to Domestic Energy and Industry
As imports decline, banks are beginning to redirect capital into Nigeria’s growing domestic refining and distribution industry. The Dangote Refinery and several modular plants require financing for depots, pipelines, tank farms, and truck fleets.
“Project finance and working capital for domestic refining is the next frontier,” said Tunde Bakare, a corporate-banking executive in Lagos. “Banks that pivot early will capture a new class of clients as Nigeria builds a homegrown downstream industry.”
This shift aligns with CBN’s push for banks to diversify lending into agriculture, manufacturing, and export-driven sectors. The regulator has long sought to reduce dependence on oil imports and channel capital into industries that can create jobs and earn foreign exchange.
New Opportunities in the Value Chain
The expansion of domestic refining is opening doors across the supply chain. Petrochemical plants, plastics manufacturers, and transport companies now expect more reliable access to feedstocks such as polypropylene and naphtha.
Banks are stepping in with tailored financing: asset-backed loans for logistics fleets, trade facilities for exporters of petrochemical by-products, and digital payment platforms for downstream marketers distributing fuel locally.
With transactions shifting to naira, domestic payments and cash-management services are also becoming new revenue sources for banks, compensating in part for the loss of dollar-denominated trade finance.
Risks and Uncertainties Remain
Despite the positive long-term outlook, challenges linger. The Dangote Refinery is still in its ramp-up phase, and any technical disruption could trigger a temporary return to heavy fuel imports, reviving dollar demand and testing banks’ capacity to adapt.
Transparency is another concern. Clear pricing structures and regulatory oversight are essential to prevent distortions in the domestic market. If disputes over costs or supply arise, banks financing the sector could face unexpected credit risks.
Regulators are also likely to recalibrate their oversight, with the CBN expected to adjust lending guidelines, including risk weights for oil-sector exposures, to ensure banks spread their funding across more productive sectors.
A Structural Shift in Banking
The decline in fuel imports represents more than just a temporary dip—it signals a structural transformation in Nigeria’s banking industry. A model built on financing imported petroleum is giving way to one focused on domestic production, diversified lending, and more stable currency markets.
“The second-quarter trade numbers are a milestone,” said Oke. “If the refinery continues scaling and reforms hold, Nigeria’s banks will operate in a fundamentally different environment—less vulnerable to global oil shocks and better positioned to fund real economic growth.”
For lenders, the challenge is clear: adapt or risk decline. Those that shift quickly into financing agriculture, manufacturing, and the expanding domestic energy industry could emerge stronger. Those that cling to the old import-driven model may soon find their profit engines running on empty.
