Petrol Prices Could Soar Above ₦1,000 Without Competition Between NNPCL, Dangote Refinery – Economist Warns
The ongoing pricing battle between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery is proving beneficial to consumers, preventing a sharp rise in petrol prices, economist Paul Alaje has stated. According to Alaje, the lack of agreement between the two oil giants is a positive development, as it fosters competition and curtails excessive profit-taking by monopolists.
Speaking on Channels Television’s Politics Today on Tuesday, Alaje explained that the competition between the two major players in Nigeria’s downstream oil sector is advantageous to Nigerians, keeping fuel prices relatively stable. “You may want to call it a price war, but in economics, when a duopoly fights, it benefits the populace as both players drive themselves toward neutral profits,” he remarked.
Implications of a Price War
The economist warned that should one of the competitors exit the market or cease price competition, petrol prices could surge above ₦1,000 per litre. He stressed that continued rivalry in pricing is crucial for affordability. “If any of them fizzle out, be ready to buy petrol at over ₦1,000 again,” he cautioned.
In a strategic move to gain market advantage, the $20 billion Dangote Refinery, owned by Africa’s richest man, Aliko Dangote, recently reduced its ex-depot price for petrol from ₦890 to ₦825 per litre. This price adjustment translated to retail pump prices of approximately ₦860 per litre in Lagos, ₦870 in the South-West, ₦880 in the North, and ₦890 in the South-South and South-East regions. The refinery has also implemented price reductions for diesel in recent weeks.
NNPCL’s Response and Market Dynamics
In response to Dangote’s price cut, the NNPCL promptly lowered its own retail price from ₦945 to ₦860 in Lagos, adjusting rates similarly across its outlets nationwide. This move signals a direct competitive response, further reinforcing the ongoing price battle.
Alaje noted that while the current price reductions benefit consumers, the sustainability of such measures depends on increasing local production. He urged NNPCL to enhance domestic refining capacity rather than rely on imported petroleum products to compete effectively with Dangote Refinery.
Structural Challenges in Nigeria’s Oil Sector
Despite being Africa’s most populous country and a major oil producer, Nigeria has long suffered from inadequate refining capacity. State-owned refineries have remained largely non-functional for decades, forcing the country to rely on costly fuel imports. Fuel subsidy removal in May 2023 under President Bola Tinubu led to a dramatic surge in petrol prices from approximately ₦200 per litre to nearly ₦1,000 per litre, exacerbating economic hardships for citizens.
Last December, Dangote Refinery commenced operations, starting with a refining capacity of 350,000 barrels per day, with an ambitious target of reaching 650,000 barrels per day by year-end. The refinery, which previously faced regulatory hurdles, has now begun supplying petrol, diesel, and aviation fuel to the domestic market.
With persistent energy challenges, including epileptic power supply and reliance on fuel-powered generators, Nigeria’s oil market remains critical to economic stability. Industry stakeholders argue that robust competition between NNPCL and Dangote Refinery, alongside improved local refining, is the best strategy to prevent exploitative pricing and ensure affordable fuel for consumers.
The Path Forward
Alaje remains optimistic that further price reductions are achievable, asserting that petrol prices should fall below ₦700 per litre if market forces and local production dynamics are properly managed.
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