In recent weeks, petrol prices in Nigeria have seen a noticeable decline. This shift is being celebrated by consumers, but what is driving this change, and why is it happening now?
The NNPC Price Reduction: A Shift in the Market
In March 2025, the Nigerian National Petroleum Corporation Limited (NNPCL) made headlines by reducing the price of petrol at its stations across the country. The price at NNPCL stations fell to N860 per litre, a significant shift from the earlier price of about N890 per litre. This reduction is part of a broader trend in the oil market, and it reflects several interconnected factors:
Increased Competition: The entry of new players like Dangote Refinery and the competition among established ones like MRS has created an environment where pricing strategies are shifting. As more refineries come online and improve domestic production, the need to rely on imports decreases, which impacts the price of petrol.
Domestic Refining Capacity: The reduction in fuel prices is also linked to the growing domestic refining capacity. Historically, Nigeria’s dependence on imported refined products led to high fuel prices due to the cost of importing and the volatility of the global market. However, with more refining capacity now coming online, particularly with Dangote’s refinery, the pressure on imports is reduced.
Regulatory Adjustments and Fiscal Policies: The Nigerian government’s decision to remove fuel subsidies and devalue the naira initially led to price hikes, but the current price reductions are likely a response to the stabilization of the currency and the market’s adaptation to new fiscal policies. The government’s shift towards a more market-driven approach in fuel pricing has made the sector more competitive and transparent.
Dangote Refinery: A Game-Changer in Nigeria’s Oil Sector
When the Dangote Refinery begins full operations, it will be a significant disruptor in the Nigerian fuel market. With a capacity to refine 650,000 barrels per day, this refinery is poised to meet a substantial portion of Nigeria’s domestic fuel demand.
Self-Sufficiency in Refined Products: Dangote’s refinery will significantly reduce Nigeria’s dependence on imported refined products. Currently, Nigeria relies heavily on foreign refineries, which adds to the cost of fuel due to importation expenses, currency fluctuations, and transport costs. Dangote’s refinery will refine crude oil locally, thereby keeping costs down and stabilizing domestic fuel prices.
Economies of Scale and Price Competition: The sheer size of Dangote Refinery means it can benefit from economies of scale, which gives it an edge in pricing. By producing at such large volumes, Dangote can afford to sell at competitive prices, forcing other suppliers (including NNPCL) to adjust their pricing strategies in order to remain competitive.
Impact on Petrol Prices: Dangote’s entry into the market is already having an impact on petrol prices. As the competition intensifies, fuel prices are expected to continue to fall, benefiting Nigerian consumers. This trend is already being seen with the recent price reduction by NNPCL, which may be partly a response to Dangote’s refining capacity.
The Role of Global Oil Prices
While the entry of new refineries is a huge factor in the falling petrol prices in Nigeria, it’s important to acknowledge that global oil prices also play a key role. Over the past few months, global oil prices have seen fluctuations, but there has been a general trend of moderation, which has helped contribute to price reductions in Nigeria.
Global Market Trends: The price of crude oil on the international market has seen some decline, and this has trickled down to the retail prices of petrol in Nigeria. With more crude oil being refined locally, the impact of global oil prices is still felt, but it’s less pronounced than in the past when Nigeria had to rely almost entirely on imports.
Currency Stability: Another contributing factor is the relative stability of the Nigerian naira, which has helped moderate the cost of importing any remaining fuel products. Although currency fluctuations can still impact fuel prices, the strengthening of the naira has made it easier for companies like NNPCL and MRS to manage their import costs more effectively.
The Future of Petrol Prices in Nigeria
The recent drop in petrol prices is expected to continue, but there are several factors to consider as we look ahead:
Competition and Market Dynamics: As Dangote’s refinery ramps up production, the level of competition will only increase. More refineries entering the market will likely push prices lower, but companies will also have to factor in the cost of maintaining quality and the logistical challenges of distribution.
Government Policy Adjustments: Government fiscal policies, including subsidies (or their removal), the management of foreign exchange reserves, and oil export dynamics, will continue to play a major role in shaping fuel prices. If the government remains committed to market-driven pricing, the falling trend in fuel prices may continue, provided global oil prices do not surge dramatically.
Regional Disparities: While petrol prices may continue to fall in major cities, there may still be significant disparities in rural and northern regions due to logistical costs and infrastructure challenges. These regions may not see the same price benefits unless distribution networks improve.
Nigeria’s oil sector is undergoing significant transformation, with new players like Dangote Refinery coming into the picture, shaking up the market. As competition intensifies and the local refining sector grows, Nigerians can expect even more stability and potentially lower petrol prices in the near future.
