Deregulation Takes Hold as Petrol Prices Fluctuate
The deregulation of Nigeria’s petroleum sector, which was expected to create a competitive market where local refineries set fuel prices based on supply and demand, appears to be taking shape—albeit in a slow and unstable manner.
The latest sign of this shift came with the Dangote Petroleum Refinery’s decision to lower the ex-depot price of Premium Motor Spirit (PMS), commonly known as petrol, from N950 to N890 per liter.
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In a statement issued by its Group Chief Branding and Communications Officer, Anthony Chiejina, Dangote Refinery explained that the price cut was a response to declining global crude oil prices, signaling that market forces, rather than government intervention, now dictate fuel prices in Nigeria.
The decision is seen as a natural consequence of deregulation, where local refiners and importers adjust prices based on crude costs, forex rates, and supply-demand dynamics.
“Dangote Petroleum Refinery firmly believes that this reduction from N950 to N890 will result in a meaningful decrease in the cost of petrol nationwide, thereby driving down the prices of goods and services, as well as the overall cost of living, with a positive ripple effect on various sectors of the economy,” the statement said.
However, the Dangote Refinery has emerged as the dominant player in the market, as NNPCL and independent marketers still depend on imported fuel, raising questions about the true level of competition in the sector.
Since Nigeria’s fuel subsidy was removed in May 2023, NNPCL and marketers have struggled to ensure stable supply, relying on expensive imports at volatile international rates. In contrast, the Dangote Refinery, Africa’s largest with a 650,000 barrels-per-day capacity, has gradually gained the upper hand, supplying locally refined petrol at prices that, while high, are still influenced by its ability to control production costs.
This latest price cut from N950 to N890 suggests that Dangote Refinery is now setting the benchmark for local petrol pricing, as marketers and the NNPCL—still heavily reliant on imports—have yet to match its prices with a corresponding reduction.
Dangote’s Legal Battle to Stop Fuel Imports Raises Monopoly Fears
Industry experts believe this reflects the early stages of Nigeria’s transition away from imported petrol, but the imbalance in supply sources raises concerns about the long-term effects of Dangote’s dominance.
As part of its efforts to solidify its control over Nigeria’s fuel supply, Dangote Refinery is also locked in a legal battle with key industry stakeholders, seeking to prevent fuel imports into the country altogether. The refinery has filed a lawsuit against the Nigerian National Petroleum Company Limited (NNPCL), the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and independent marketers, asking the court to halt the importation of petrol into Nigeria.
If granted, this request would effectively eliminate competition from fuel importers, giving Dangote Refinery a monopoly over the domestic supply of petrol. While this could lead to more stability in pricing, many are concerned that such a monopoly would leave Nigerians vulnerable to unchallenged price hikes, as no other major supplier would be available to force competitive pricing. The Warri Refinery is still dragging foot, with no convincing sign that it will function at full capacity soon.
Despite the price cut to N890 per liter, Nigerians remain cautious about the long-term impact of Dangote Refinery’s growing influence. While lower petrol prices offer temporary relief, the outcome of the ongoing legal battle against importers could reshape the fuel market in ways that make price reductions less likely in the future.
The core question remains: If Dangote Refinery successfully stops fuel imports, will it maintain competitive pricing, or will it use its monopoly to push prices even higher?
