Modupe Olalere
The frequent price war among Nigerian oil marketers, championed by the Nigerian National Petroleum Company Limited (NNPCL) and Dangote Refinery, has characterized Nigeria’s downstream oil market. The stiff competition, which is characterized by ruthless price-slashing, has widespread effects on the Nigerian economy, including its impact on inflation, jobs, and economic stability.
The price war began in the first quarter of 2025, with Dangote Refinery and NNPCL trading punches through price slashing. On March 3, 2025, NNPCL adjusted the pump price of petrol to N860 per litre after Dangote’s competitive pricing. This followed Dangote’s reduction of its ex-depot price of petrol from N890 to N825 per litre, the second cut in the New Year and the third in two months.
The motives of key actors in this price war are not straightforward. Dangote Refinery, a dominant private actor, wants to gain market share and become a giant in Nigeria’s refining sector. NNPCL, on the other hand, wishes to retain its market share and make its activities sustainable in the event of competitive pressure.
The regulatory environment in this sector has been revolutionised. The removal of fuel subsidies and deregulation of the downstream petroleum market in 2023 provided an opportunity for a market-based pricing system in which prices will be set by competition and not by government intervention. This has created an avenue for companies to transform quickly by evolving market forces to remain competitive.
However, the same competitive situation has also been criticised for making the local refineries unviable and affecting the oil importers. Most importers find it challenging to match Dangote prices in terms of the cheaper cost of crude oil and better refining processes. The implication is that the importers are incurring humongous losses as the average landing cost of petrol is much above selling prices.
The price war between NNPCL and Dangote has short-term benefits but long-term effects on Nigeria’s economy. Even though consumers are presently paying lower fuel prices, the continuity of this trend is doubtful.
The successive price reductions have caused enormous losses to importers and oil marketers, who lose N2.5 billion daily and N75 billion monthly. The economic burden could lead to minimal investment in the sector and redundancies, contributing to unemployment.
Besides, price volatility can lead to inflation and economic instability. Volatile fuel prices increase the cost of transportation, impacting the general economy, food markets, and small businesses. The multiplier effect of increasing fuel prices can send millions of Nigerians into poverty, as seen in the last couple of years.
To address these challenges, several solutions have been proposed. They are price regulation: The marketers have demanded a regulatory framework in which price changes would be allowed only after a gap of six months to stabilise the market and minimise losses. This mechanism, nevertheless, may be opposed by advocates of market liberalisation.
Market Liberalization: Allowing more competition by entering more private refineries into the market can reduce prices and increase efficiency. This is in line with the process of deregulation but needs to be carefully regulated to avoid monopolistic trends.
Stakeholder Engagement: To reach the root of sustainable solutions, all stakeholders, including government institutions, private refineries, and oil marketers, must be involved. This could involve negotiating price policy, investment incentives, and regulatory reforms to balance and compete in the market.
Even though it is beneficial to consumers, the price war that is taking place between Dangote Refinery and Nigerian marketers is a risky fight that has the potential to revolutionize Nigeria’s economy. The ultimate impact that this price war will have on inflation, unemployment, and economic stability requires careful consideration and strategic management. Regulation of competition will be essential to maintain the benefits of this price war without destabilising the economy.
As an energy expert and President of the Nigerian Economic Society noted, the price war ultimately benefits Nigerians because it makes fuel cheaper. However, stakeholders are worried that if left unchecked by a stern regulatory hand, the downstream sector may experience severe structural and market ramifications. The ongoing competition is a direct result of deregulation, and its maintenance entails increased players in the market to prevent monopolistic inclinations.
The Dangote refinery’s potential to meet local demand without resorting to imports can fundamentally alter Nigeria’s oil policies and refining industry dynamics. Issues like the exchange rate problem and the need to purchase crude in dollars do not impact pricing models. The energy sector and economy of Nigeria will depend on balancing competitiveness and stability as it navigates this minefield.
Other than these steps, the government can offer domestic refineries incentives to become more competitive and efficient. These can take the form of tax concessions, subsidies for upgradation, or priority supply of crude oil. By offering incentives to domestic refineries, Nigeria can minimise its import dependence and stabilise the market to benefit consumers and the economy.
Further, price mechanism transparency needs to be improved. All market players need quick, accurate information about market circumstances, production costs, and pricing plans. Consumers, marketers, and regulators will trust transparency, making market operations efficient and reducing price manipulation.
The global environment also exerts a tremendous amount of influence on Nigerian oil market dynamics. Geopolitical tensions and supply chain disruptions, driven by international oil prices, have the potential to dictate policy pricing locally. Nigeria needs to be sensitive to what is taking place in the world to stabilize its domestic market and adjust its policies accordingly.
Finally, the price war between Nigerian marketers and Dangote Refinery is both an opportunity and a threat to the Nigerian economy. Although it lowers the prices of fuel for consumers, it also has the potential to destabilize the economy and cause workers to lose their jobs. Its threats can be countered by balancing regulatory control, market liberalisation, and stakeholder engagement. If these are achieved, Nigeria can boast of a competitive and stable energy industry that will drive economic growth and development.
