The fuel market is experiencing a prolonged struggle as competition between the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Petroleum Refinery intensifies. This ongoing dispute, characterised by aggressive price reductions and shifting market conditions, highlights the urgent need for strong governance to address regulatory concerns and ensure market stability.
The removal of fuel subsidies in May 2023 marked a major shift in Nigeria’s energy policy, replacing state-controlled pricing with a market-driven model. This decision was intended to relieve the government of a financial burden that consumed 40% of federal revenue in 2022 and to eliminate widespread corruption associated with subsidy payments. The policy was also designed to reduce persistent fuel shortages and encourage private-sector investment in refining capacity.
However, the transition has been marked by instability. The depreciation of the naira, which lost 245% of its value between May 2023 and September 2024, has significantly increased the cost of imported fuel.
This has resulted in an unintended occasional reintroduction of subsidies through NNPC’s below-market pricing. While deregulation was meant to reduce government involvement, NNPC’s role in setting fuel prices suggests continued state influence. The company’s decision to cut prices to N860 per litre, aligning with Dangote’s reductions, signals its determination to maintain market dominance.
The competition between NNPC and Dangote has led to short-term benefits for consumers. Petrol prices have dropped from N1,040 to N860 per litre since November 2024, with independent marketers occasionally offering even lower prices in Lagos and Abuja. This has also helped reduce the long queues that were common when pricing was regulated.
Despite these benefits, the ongoing struggle has exposed structural weaknesses. Oil marketers report daily losses of N2.5 billion due to unpredictable price changes, forcing them to cut purchase volumes. The instability has prompted calls for regulatory intervention, including suggestions to limit price adjustments to twice a year.
The ongoing dispute between NNPC and Dangote over crude oil supply agreements further complicates the situation. Dangote’s decision to source crude from international markets in dollars—due to stalled negotiations over naira-based supply agreements—reveals regulatory inconsistencies.
Policymakers must strike a balance between protecting consumer interests and ensuring the sustainability of industry players. To address these challenges, policymakers should prioritise the following measures transparency in pricing mechanisms. NNPC should disclose its cost structures and pricing strategies to dispel concerns about hidden subsidies. This would align with the Petroleum Industry Act’s (PIA) objective of fostering openness and accountability.
Stronger regulatory oversight by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to ensure clear rules on price adjustments to prevent excessive volatility. Introducing guidelines that require justification for price changes could help stabilise the sector.
The government should support local refining through tax incentives and infrastructure investment, as proposed in the Gas Master Plan and PIA. This would reduce reliance on imports and mitigate the impact of currency fluctuations on fuel prices.
And most important is the resolution of the crude supply disputes. The Federal Government and Dangote should engage in open discussions to resolve their disagreements over crude oil supply. A transparent and cooperative approach could ensure that local refining operations are not undermined by unnecessary conflicts.
The ongoing fuel price war demonstrates both the opportunities and risks associated with deregulation. While competition has led to lower prices and improved supply, weak governance structures threaten to create instability. To secure long-term progress, authorities must balance market efficiency with regulatory oversight, ensure greater transparency, and foster collaboration between public and private stakeholders. Addressing these issues effectively will be crucial in shaping a fair and sustainable fuel market in Nigeria.
Research & Advocacy Department,
Chartered Institute of Directors (CIoD)
28, Olawale Edun Road (Formerly Cameron Road), Ikoyi, Lagos.