Market battles at the gantry: How competition, not refining cost, sets petrol prices

Nigeria's petrol pricing landscape has undergone a significant shift, with competition and global market forces now playing a more dominant role than the cost of local refining. While the nation once grappled with exporting crude oil and importing refined products, the arrival of the Dangote Refinery, with its substantial processing capacity, promised to reverse this trend and lower fuel prices. However, the expected price reductions have yet to fully materialize, indicating a more complex pricing mechanism at play.

The investigation reveals that prices at depots and gantries, the entry points for fuel into the distribution chain, are now closely tied to international crude oil movements, fluctuating exchange rates, and import parity. This suggests that Nigeria's downstream petroleum sector is deeply integrated into global energy markets, making local production costs a less decisive factor in the final pump price.

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The downstream sector was already shaped by importers, depot owners and marketers operating within a framework driven by international crude prices, exchange-rate movements and years of subsidy-induced distortions.

Aliko Dangote, the refinery's founder, has publicly stated that entrenched interests have resisted the emergence of domestic refining. He described the refinery's initial year of petrol production as a challenging battle against operators who benefited from the previous import-dependent system. This suggests that market structures and established players continue to influence pricing, even with increased local supply.

The narrative that increased local refining capacity would automatically lead to cheaper petrol has been challenged. Instead, the market appears to be adapting to the new supply dynamics while still being heavily influenced by international benchmarks and the competitive environment among various stakeholders in the downstream sector. The interplay of these factors dictates the price consumers ultimately pay at the pump.

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The refinery’s founder, Aliko Dangote, has repeatedly argued that entrenched interests have resisted the emergence of domestic refining.