Fuel at N435? Expert Says Production-Cost Pricing Could Halve Petrol Price

Petrol in Nigeria could sell for as low as N435 to N687 per litre if the country priced locally refined fuel by what it actually costs to produce — not by what it would cost to import.

That is the argument of petroleum engineer and economist Prof. Izielen Agbon, speaking at a virtual public discussion hosted by the Alliance on Surviving COVID-19 and Beyond (ASCAB) on “Working Class Solutions to PMS Price Increases and Fuel Subsidy Removal.”

Agbon said applying a production-cost pricing (PCP) model to the 445,000 barrels-per-day crude allocation reserved for NNPCL refineries — at an exchange rate of N1,333 to the dollar — would yield a pump price between N435 and N687. PCP prices fuel from crude, refining, transportation, distribution and taxes. The prevailing import-parity pricing (IPP) model instead prices it on international product prices, freight and the opportunity cost of imports, regardless of how cheaply Nigeria produces crude at home.

His prescription: rehabilitate the four government-owned refineries, make NNPCL the supplier of last resort and price-setter, and use that benchmark to break what he called the oligopolistic influence of the Dangote Petroleum Refinery.

The real debate, he argued, is no longer whether subsidy should go — it is what pricing mechanism an oil-producing country uses at all. IPP, he said, has exposed Nigerians to global crude swings and naira depreciation the country should not have to absorb, and has actively discouraged local refining.

He also questioned whether subsidy removal ever reached workers: petrol prices rose, and with them transport, food, rent and household costs — while wages stood still.

Human rights activist Femi Falana, who chaired the session, said workers could no longer carry the burden of petrol-driven living costs.

Political fallout

The Allied Peoples Movement (APM) has demanded the resignation of Edo State Governor Monday Okpebholo over what it called an “insensitive response to economic hardship.” The governor had compared Nigerian and UK pump prices — citing over N3,000 per litre in London — and concluded Nigerians were “doing very well.” The APM rejected the comparison as misleading, arguing nominal naira prices ignore income, purchasing power and cost of living.

Accord Party presidential candidate Dr Gbenga Olawepo-Hashim, speaking at the Diaspora Dialogue in Ilorin, promised to give Nigerian refineries crude at a strategic domestic price under his “Energy First” policy — a cost advantage he says would make Nigeria a global energy hub. “Nigeria has spent decades giving the world our crude and buying back the value created from it,” he said.