Premium News
AGAINST LOCAL PROPAGANDA, NIGERIA’S PETROL PRICE DUE TO GLOBAL PRICING
Nigeria is on the brink of a rare moment of respite as petrol prices are falling. This respite is rare, and in Nigeria, where petrol costs are dictating the rhythm of daily life from the cost of food prices to transportation, this should be welcome news. But a dangerous narrative threatens to distort reality even as global prices are trending down.
No refinery should claim credit for this relief and frame it as part of its ongoing benevolence rather than what it truly is. We need to be clear: any drop in the pump price for petrol is driven by global market forces and not the refinery. Allowing a single entity to claim credit for a global reduction and potentially dominate Nigeria’s energy future will be a grave disservice to Nigeria and Nigerians.
Global market dictates prices
Over the past year, global forces of demand and supply and shifts in geopolitics have reshaped the global oil landscape. After a $90 per barrel peak in late 2023, Brent crude prices have dipped below $80 per barrel in recent weeks, and even touched $60 per barrel a few days ago.
Analysts have predicted that, barring any global conflicts, there will be more price decreases, especially as non-OPEC producers are ramping up output and renewable energy adoption is accelerating. For countries like Nigeria, this should translate to lower pump prices. However, Nigeria’s fuel pricing mechanism is currently broken.
The Nigerian National Petroleum Company (NNPC) long imported petrol at global prices and sold it domestically at subsidised rates to Nigerian residents.
In 2023, President Bola Tinubu abruptly ended subsidies, causing prices to skyrocket, from an estimated N189 to N600 per litre. Today, even as prices seem stable, we continue to see abrupt reductions and jumps in the pump price of petrol.
In March, the refinery announced a reduction of its ex-depot price from N890 per litre to N825 per litre. Despite framing this reduction as an act of benevolence, prevailing market conditions brought about this reduction in petrol pricing.
Dangote refinery has been touted as a solution for Nigeria’s energy woes. Still, the refinery operates in U.S. dollars as a necessity for its imported equipment and loan obligations. This means its output is tethered to global pricing benchmarks.
Simply put, the refinery cannot sell petrol cheaper than the global market rate without incurring losses. If global prices drop, Nigerians benefit, not because the refinery announced a drop in pricing.
The “Naira-for-Crude” rescue myth
To support its benevolence narrative, the refinery will coalesce around the renewal of the “Naira-for-crude” deal, but this deal allows the refinery to buy Nigerian crude in Nigerian naira rather than dollars. In a few days, proponents will begin arguments for why this arrangement will cut costs and allow the refinery to lower pump prices. But this is misleading.
While the naira-for-crude deal will marginally reduce naira to dollar conversion headaches, it does not insulate the refinery from the realities of global oil markets. The NNPC still prices its crude in dollars, as is done globally. The arrangement allows it to sell to the refinery in the equivalent naira. But selling crude to the refinery in naira is not a magic pill that will magically reduce the refinery’s production costs, which are influenced by global supply chains and financing terms.
Nigerians must be wary because the impending price reduction and the timing of this deal will allow the refinery to position itself as a benevolent price setter for the benefit of Nigerians—a smoke screen. Even worse, we risk handing a company with monopolistic tendencies–as was seen with sugar and cement–unchecked power to manipulate the narrative and eventually prices.
Monopolies have only bred exploitation, never national prosperity
History teaches us a clear lesson. Monopolies stifle competition, innovation and fair pricing. In America’s Gilded Age, the Rockerfellers and Carnegies amassed their fortunes by crushing market rivals and dictating terms to consumers. In Nigeria, we are seeing history repeat itself. The Dangote empire, spanning cement, sugar and now oil, seems to be following a familiar playbook. The refinery–the largest single-train refinery in the world–threatens to drown out smaller importers and refiners and create a captive market where it alone can dictate supply.
This is not speculation. Dangote Cement controls over 60 per cent of Nigeria’s market and has long been accused of price fixing. A 2024 report by Business Day showed that Nigeria’s cement price was 69 per cent higher than India’s, even as Nigerian construction firms have struggled to afford materials, leading to a housing crisis and an increase in the cost of rent.
Today, Nigeria’s petroleum sector risks following suit. The refinery already dominates local refining capacity and can effectively set prices by citing “production costs” while obfuscating its true cost if there are no market competitors. For consumers, this will mean relief is only fleeting and might lead to perpetual exploitation.
A path forward: Enter the NMDPRA and FCCPC
Nigeria’s regulators must prevent this outcome. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) should accelerate licensing for modular refineries to bring more players into the market. Competing players should not only be allowed, but encouraged to import petrol at global rates. This will create a market-driven pricing model. The FCCPC needs to look at the long-term effects of predatory pricing and not hide under the momentary relief of bad-faith pricing of petrol offers to Nigerians.
Credit should also be given to the Central Bank, as we have recently seen stability in the pricing of the dollar. Still, work must be done by the CBN to get the value of the naira back to its old glory, as a stronger Naira means global price drops will translate to real, sustainable relief for Nigerians.
Most importantly, the Nigerian government must not fall into the trap of “patriotic capitalism”, where there’s an idea that Nigeria’s prosperity hinges on empowering a handful of well-connected tycoons. True patriotism means the Federal government builds policies that will prioritise the welfare of the over 200 million Nigerians over the ambitions of the few.
Nigerians deserve honest pricing and even more honest players
The coming weeks will bring a dip in petrol prices. This is not altruism. Global markets will drive this change. We must remember that there’s no single player in the downstream sector that is a charity. The refinery, especially, is a part of a business empire with a troubling history of market manipulation.
Nigerian regulators have work to do, but first, an important question to answer: will they enable a monopoly in the making, or will they foster a competitive market that protects consumers? The answer to this will determine Nigeria’s economic future.
A reduction in petrol prices is coming, but we must remember, this is from the global markets and not the “goodwill” of a singular Nigerian player.
Ogunlana is a freelance energy journalist based in Lagos
