When Market Gains Don’t Reach Consumers: The Need for Accountability in Fuel Pricing

By Nick Agule

In September 2024, the Nigerian National Petroleum Company Limited (NNPCL) published a pricing template for the Dangote Refinery, with the estimated pump price set at N950 in Lagos. This template was built on two key assumptions: a crude oil price of $71.61 per barrel and an exchange rate of N1,637.59 per dollar.

Today, both indicators have moved in ways that should ordinarily favour consumers, yet petrol prices have remained high.

Crude oil prices have fallen significantly this year, reaching lows of $58.50 and currently trading around $63.27 – a decline of about 18% at the lowest point, and 12% at current levels. In addition, the exchange rate has appreciated to around N1,453, representing an improvement of about 11%.

Applying the combined effect of lower crude prices and a stronger naira to the original NNPCL template suggests that pump prices could reasonably be closer to N732.

This raises an important question: Why have consumers not seen these benefits reflected in the pump price, which remains close to N1,000?

Nigerians deserve clarity on this matter, and it would be helpful for the NNPCL, Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and Dangote Refinery to offer transparent explanations to Nigerians.

The Dangote Refinery is a national milestone – one that many Nigerians are proud of, as it positions us to refine our own products and reduce dependence on imports. However, as the country’s primary domestic supplier, the refinery also occupies a position that resembles a monopoly (albeit not by its own making). Around the world, markets with limited competition are typically guided by regulations that ensure fair pricing, reasonable profit levels, service quality, and consumer protection which the NMDPRA is expected to side with Nigerians to perform this regulatory oversight creditably.

If Dangote refinery is unwilling to offer competitively priced products under current conditions, it may be appropriate for the government to allow importation to create healthy competition. In principle, domestically refined products should be more affordable than imported ones. Yet when import landings begin to look cheaper, proposals to impose additional duties to make imports less competitive risk unintentionally burdening Nigerian consumers. While ensuring the quality of imported products is essential, using taxes primarily to support higher domestic prices may be counterproductive.

Ultimately, the downstream regulator – the NMDPRA – has an important role in ensuring that movements in crude oil prices and exchange rates translate into benefits for Nigerian consumers. Petroleum product prices affect not only transportation but also electricity generation, meaning they have a profound impact on inflation and living conditions.

Nigerians deserve to feel the relief that these favourable market conditions should bring. It is important that all stakeholders work together to ensure that consumers are not denied these expected gains

Nick Agule, a Nigerian energy expert, is dedicated to supporting the success of the Dangote Refinery while also ensuring fair outcomes for Nigerian consumers.

Email: nick.agule@yahoo.co.uk
X: @NickAgule
Facebook: Nick Agule, FCA