 |
| Dangote Refinery in Lagos |
Editor’s Note:
This explainer piece sheds light on Nigeria’s fuel pricing system after subsidy removal and the forces influencing prices beyond official policy.
For decades, fuel pricing in Nigeria followed a predictable pattern. The government fixed the price of petrol, kept it artificially low, and absorbed the difference between the real cost and what consumers paid at the pump. This fuel subsidy system offered temporary relief to citizens, but it quietly created deep structural damage where public funds were drained at scale, smuggling thrived across borders, artificial scarcity became routine, and private investment in refining and distribution was discouraged. By 2022, subsidy payments had grown so large that they consumed a significant share of national revenue, squeezing funding for health care, education, infrastructure, and security.
When President Bola Ahmed Tinubu announced the removal of petrol subsidy in 2023, the message was framed as a turning point. Subsidy removal was meant to end government price fixing, reduce fiscal pressure, encourage competition, and attract private investment into the downstream sector. In theory, fuel prices would now reflect market realities, and Nigeria would finally exit a cycle that had trapped it for decades.
But in practice, subsidy removal did not end control. It only shifted it.
 |
| Petrol pump prices in Nigeria |
What followed was not the emergence of a free and open market, but a complex struggle over who would now shape prices, control supply, and absorb the shocks of transition under the Tinubu led administration. Almost immediately, attention turned to the Nigerian National Petroleum Company Limited (NNPCL). Reformed under the Petroleum Industry Act as a commercial entity, NNPCL nonetheless retained overwhelming influence. It remained the dominant importer of petrol, the largest supplier to marketers, the primary allocator of crude oil, and the price signal the entire market watched. Even without official price fixing, its scale alone made its prices de facto benchmarks.
This contradiction defined Nigeria’s post-subsidy fuel market: deregulated in principle, but still highly concentrated in practice. Independent marketers began to question whether true competition was possible when one company controlled most of the supply chain. The Independent Petroleum Marketers Association of Nigeria (IPMAN) voiced concerns that NNPCL’s pump prices were company prices, not regulations, and that forcing a uniform pricing template ignored regional depot costs, logistics, and market realities. In their view, deregulation without multiple strong suppliers was only partial reform.
Then came the disruption that changed everything.
The entry of Dangote Petroleum Refinery into the downstream market marked the first serious challenge to Nigeria’s long-standing import dependence. For decades, the country exported crude while importing refined products, a paradox that enriched middlemen and weakened domestic capacity. Dangote Refinery introduced large-scale local refining with the potential to displace imports, stabilise supply, and influence prices from within Nigeria.
But, as it turned out to be, that influence was never going to arrive quietly.
From the outset, crude supply became a pressure point. Despite being a Nigerian refinery operating on Nigerian soil, Dangote faced inconsistent crude allocation and payment terms tied to foreign currency. This meant selling refined products in naira while buying crude in dollars, a structural disadvantage that exposed the refinery to foreign exchange risk and constrained its pricing flexibility. Crude, in this phase, was no longer just a raw material. It became leverage in a wider struggle over control.
As Dangote products entered the market, the impact was immediate and visible. Pump prices began to fall in stages. Each reduction sent shockwaves through a system built around higher import costs. Marketers holding expensive stock resisted. Import-aligned interests pushed back. What followed was not polite competition but a ruthless pricing war, one that tested margins, exposed inefficiencies, and forced rapid adjustments across the downstream sector.
Dangote-linked supply repeatedly undercut prevailing prices, forcing reviews and resets. The narrative shifted from pricing freedom to price survival. Some marketers delayed lifting products. Others questioned terms and logistics. Publicly, disputes were framed as commercial disagreements. Beneath the surface, the anxiety was clearer: local refining was collapsing margins that imports had protected for years, and an old order was under threat. All thanks to late former President Muhammadu Buhari's foresight and support.
Resistance extended beyond pricing. Labour tensions surfaced. Control over workforce and operations became another front in the conflict. The refinery resisted external influence, insisting on tight internal governance at a time when any disruption could tilt supply dynamics. The struggle was no longer just Dangote versus NNPCL. It had become a broader confrontation between import-dependent structures and a new refining-led reality.
For consumers, the results have been mixed but revealing with falling prices demonstrating that local refining can actually work in Nigeria, and on the other hand volatility showing that the market remains unstable. The periodic scarcity threats exposed how fragile supply still is when power is contested rather than coordinated. Nigerians has began to see that subsidy removal did not automatically deliver stability; it only exposed a battlefield.
Today, Nigeria sits in a transition phase where fuel pricing is shaped less by official announcements and more by the balance of strength between dominant players. Until crude supply becomes transparent, competition genuinely opens up, and local refining operates without structural handicaps, fuel pricing will remain tense, political, and deeply economic.
Fuel is no longer just about transport or energy. It has become a mirror of Nigeria’s wider struggle, between reform and resistance, production and import dependence, control and competition.
The subsidy may be gone, but the struggle for control remains, and it is likely to shape Nigeria’s fuel market for a long time to come.
0 Comments