The bigger picture: Nigeria’s fuel pricing crisis

The dispute between Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) and Dangote Refinery highlights ongoing tensions in Nigeria’s oil and gas sector, where pricing and competition have been key issues for years.

Nigeria, despite being one of the largest oil producers in Africa, has struggled with fuel supply crises, price hikes, and the lack of sufficient refining capacity.

The country relies heavily on fuel imports to meet domestic demand, which has contributed to high prices and economic instability.

PETROAN strongly rebuked Dangote Refinery’s pricing strategy, accusing the company of attempting to monopolize Nigeria’s downstream petroleum sector.

The sharp criticism follows Dangote Refinery’s claim that marketers, including PETROAN, are opposing its petrol pricing because they wish to import substandard products at cheaper rates.

In a statement by PETROAN’s spokesperson, Joseph Obele, rejected Dangote’s allegations, calling them a “gimmick” designed to maintain the company’s monopoly on Nigeria’s fuel supply. Obele emphasized that competition in the downstream sector benefits consumers by driving prices down and ensuring the availability of quality products.

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“Dangote’s publication is not a surprise, as it’s their usual tactic to maintain monopoly,” Obele said. “Consumers deserve the benefits of healthy competition, which keeps prices fair and guarantees the quality of products. Our goal is to import high-quality Premium Motor Spirit (PMS) and offer it to Nigerians at a lower price than what is currently being charged.”

PETROAN’s statement made it clear that its strategy is not to engage in a price war with Dangote, but rather to provide affordable and superior petroleum products for consumers.

Obele pointed out that Dangote Refinery has benefited from substantial foreign exchange concessions during its construction phase, but the company’s pricing is based on international market rates, which he argued are not reflective of the actual cost of production in Nigeria.

“Dangote Refinery has enjoyed massive concessions for accessing foreign exchange during construction, yet they are setting prices based on international selling rates,” Obele explained.

“This shouldn’t be the case. Prices should be determined by the actual cost of production plus a fair margin, not inflated by factors that don’t reflect local realities.”

The association accused Dangote Refinery of using underhanded tactics to push independent marketers out of the market, including allegations that the refinery plans to blend PMS in a new plant in Lagos.

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PETROAN contends that this move is designed to monopolize fuel supply in the region, reducing competition and hurting smaller players in the sector.

PETROAN also warned against what it called “inferior products” being marketed by Dangote Refinery, further fueling concerns that the company’s dominance could harm fuel quality in Nigeria.

Obele emphasized that PETROAN’s priority is to ensure the availability of high-quality petroleum products, imported and sold at affordable prices.

As part of its broader strategy, PETROAN proposed the privatization of Nigeria’s Port Harcourt and Warri Refineries, once rehabilitated, urging that the plants be handed over to reputable firms with the technical, managerial, and financial expertise to operate them effectively.

PETROAN further called for partnerships between these firms and stakeholders like PETROAN to help revitalize the country’s oil industry and foster healthy competition.

“We believe the Port Harcourt and Warri Refineries, once rehabilitated, should be privatized and entrusted to firms that have the capability to manage and operate them efficiently,” Obele said. “This would create more opportunities for competition and help stabilize the sector.”

In response to PETROAN’s criticisms, industry experts have weighed in on the growing tension between Dangote Refinery and independent marketers.

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Some argue that while Dangote’s investments in refining capacity could ultimately benefit Nigeria by reducing its dependence on imported refined fuel, the company’s pricing strategy and market dominance could undermine local competition.

“Dangote has invested heavily in the refining sector, and there is no doubt that this could help Nigeria become more self-sufficient in fuel production,” said Dr. Olusegun Ajayi, an energy analyst at the Nigerian Economic Summit Group.

“However, if Dangote sets prices based on international rates, it may stifle competition and put smaller players at a disadvantage, which could lead to higher costs for consumers in the long term.”

Ajayi also emphasized the importance of creating a regulatory framework that ensures fair competition in the sector while encouraging investments in refining capacity.

As Nigeria looks to reform its energy sector, the balance between attracting investment and maintaining a competitive market will be critical in shaping the future of the country’s downstream petroleum industry.