The drop in global crude oil prices in recent weeks has triggered calls for a commensurate adjustment of fuel pump prices across Nigeria.
This comes as retail prices of Premium Motor Spirit (PMS), also known as petrol, remain relatively high, currently trading between ₦1,155 and ₦1,300 per litre, sparking debates about the sustainability of the price deregulation system in the country’s downstream petroleum market.
When oil sold above $120 per barrel during the peak of the Middle East conflict, involving the United States, Israel and Iran, fuel sold between ₦1,300 and ₦1,500 per litre in Nigeria. Following the ceasefire agreement reached by the US and Iran, which led to the reopening of the Strait of Hormuz, crude oil prices crashed below $80 per barrel in recent weeks.
This has raised expectations of a consequential drop in fuel prices in domestic markets. Consumers have demanded a drop in the price of fuel to around ₦900 per litre, the rate before the crisis.
Following widespread concerns raised by Nigerian consumers about the retail of fuel, the Federal Government convened a meeting of key stakeholders in the downstream oil and gas sector on Monday to address the challenge. The Minister of State for Petroleum Resources, Heineken Lokpobiri, urged the marketers to consider adjusting pump prices to reflect falling crude prices.
While marketers agreed to lower prices as the cost of crude drops, oil and gas experts and analysts have offered differing views on the realities of oil pricing in Nigeria.
While the experts agree that a drop in crude oil prices should have a consequential effect on pump prices of petroleum products, they disagree on why a global drop in crude, which fell to pre-Middle East crisis levels (around $72 per barrel), has failed to trigger a rapid drop in retail pump prices across Nigeria.
Oil and gas expert Nick Agule stated that pump prices must naturally adjust alongside international benchmarks.
Agule, who featured on Arise News Morning Show on Wednesday, argued that because crude oil is the primary cost input for any refinery, a lower global crude price should naturally lead to a reduction in the cost of production and result in direct savings at local pumps.
He approached his analysis from the perspective of a direct input-versus-output cost, stating that at about $72 per barrel, petrol should realistically be selling below ₦800 per litre in Nigeria.
“At $72 per barrel of Brent Crude, the realistic price of petrol should be below ₦800,” Agule stated.
Highlighting data on peak prices of crude during the Middle East conflict, and that of Dangote Refinery’s highest gantry price then (₦1,350 per litre), he argued that if the refinery’s gantry price fell by 40 per cent, it should be around ₦800 per litre, not the ₦1,075 per litre currently being sold to marketers.
The oil and gas expert also recalled that when Dangote Refinery commenced commercial operations in 2024, the NNPC released a template, which showed a Platt of $81 and an exchange rate of ₦1,639, resulting in an ex-depot price of ₦950 per litre, with distribution costs included. He contended that today, the exchange rate has fallen from ₦1,639 to ₦1,380 per dollar and the crude price has fallen from the $81 they used in the template down to about $72 per barrel. “If only by that alone, if you do the calculation, we should be at ₦800 pump price, not ₦1075,” he added.
He argued that the current market pricing adds a substantial markup of about ₦200 per litre on top of what the baseline gantry price should actually be.
“There is clear evidence that Dangote Refinery is pushing about N200 more on what the gantry price should be,” he claimed.
However, Professor Emeritus of Petroleum Economics Wumi Iledare explained why a drop in crude oil prices does not immediately translate to a reduction in fuel pump prices.
Approaching the issue from a macroeconomic and behavioral standpoint, Iledare countered the idea that local pump prices will instantly mirror international crude declines, explaining that the relationship is neither direct nor immediate.
Iledare, who appeared on Channels Television’s Morning Brief on Thursday, identified three main structural reasons for the high prices in Nigeria. Explaining what he called “asymmetric price transmission”, he stated that fuel pricing suffers from an economic phenomenon where pump prices shoot up like a rocket during global crises or currency depreciation, but descend slowly like a feather.
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He pointed out that marketers with older, highly expensive inventory cannot cut prices instantly without risking bankruptcy.
Another factor, according to him, is the dollarization of the oil ecosystem. He emphasised that because crude supply and refining inputs remain heavily benchmarked in U.S. dollars, foreign exchange volatility shapes pump prices. With this, he cleared the public misconception that domestic refining insulates Nigeria from foreign markets.
In a statement shared last week, the Professor Emeritus of Petroleum Economics stated that lower crude prices alone do not automatically guarantee proportionate reductions in domestic pump prices, adding that other factors can influence the prices of petrol, diesel, and aviation fuel irrespective of crude oil prices.
“It is also important to distinguish between the price of crude oil and the prices of refined petroleum products. These markets, while related, are not perfectly synchronised. Refining margins, global product demand, seasonal consumption patterns, and supply disruptions can all influence the prices of petrol, diesel, and aviation fuel independently of crude oil prices,” he stated.
He emphasised that the deregulation framework as enshrined in the Petroleum Industry Act (PIA), envisions the role for market forces in determining prices not by an administrative fiat.
Pinnacle Daily had reported that Dangote Refinery adjusted its ex-depot price four times over the last one month, from ₦1,275 down to ₦1,075, resulting in a cumulative reduction of ₦200 as oil prices dipped.
However, with the renewed tension between the US and Iran, oil prices have gone up again, raising fears of a consequential surge in pump prices in domestic markets. Brent Crude rose to $78.42 per barrel, while WTI hit $73.71 on Thursday, according to Oilprice.com.
Monopoly Concern
While acknowledging the domestic buffer provided by local production, Agule contended that a lack of competitive pricing structures keeps consumer costs unnecessarily high.
He therefore called on downstream regulators to more transparently audit the pricing books of massive local refining players like Dangote Refinery to ensure these localized cost advantages are passed directly to Nigerian consumers, rather than being absorbed as corporate margins.
Strengthening Competition in the Downstream for Affordable Prices
On strengthening competition in the downstream petroleum market, Agule said that the moment fuel subsidy was removed, the Federal Government ought to have worked towards getting competent hands to manage the state-owned refineries to produce fuel to boost competition in the market and shield Nigerian consumers from any form of price racketeering.
Commenting on the MoU signed by NNPC and two Chinese firms recently, the expert said that what the government needs to do to get immediate significant results is enter into an international joint venture (IJV) arrangement with competent operators (just like the NLNG model) to refurbish the refineries and manage them to produce more fuel.
He also suggested that the government should soften the regulatory requirements for setting up new refining plants to create room for more players to come in and compete with the dominant players such as Dangote Refinery.
On his part, Iledare stated that achieving affordable energy requires more than having lower international crude oil prices.
“It demands exchange rate stability, increased domestic refining capacity, efficient logistics, competitive markets, and policy consistency. These structural factors will deliver more durable and meaningful relief to consumers than temporary fluctuations in crude oil prices alone,” he stated.
Victor Ezeja is a Nigerian journalist skilled in producing insightful news analyses, feature stories, and interviews that simplify complex issues and drive informed public discourse. His work combines rigorous research, balanced reporting, and compelling storytelling to highlight developments shaping industries and society. Victor, who holds a Master's Degree in Mass Communication, specializes in energy, aviation, business, and economic reporting. He can be reached via @VICTOREZEJA on X