The Dangote Refinery’s Naira Suspension Triggers Fuel Price Hikes Across Nigeria
The recent suspension of naira-denominated petroleum product sales by the Dangote Refinery has sent ripples across Nigeria’s fuel market, leading to a significant price surge. MRS Oil & Gas, a major player in the downstream sector, spearheaded the price increase, raising its pump price to N930 per litre in Lagos, the nation’s commercial hub, and N960 per litre in the northern regions. This represents a N70 and N80 increase respectively, compared to the previous prices of N860 and N880. The new pricing structure, effective from March 28, 2025, has been rapidly adopted by other filling stations, with NIPCO, for instance, already implementing the N930 per litre price in Magboro, Ogun State.
MRS Oil & Gas’s new pricing model is based on a varying cost structure for transporting petroleum products from its Lagos depot to retail stations nationwide. While Lagos enjoys the lowest pump price, northern states bear the highest cost burden. The company, however, remained silent on whether its products are sourced from the Dangote Refinery. A detailed breakdown of the new price regime reveals a tiered structure across the country. Southwest states and Kwara pay N940 per litre, while South-South and South-East regions face a N960 per litre price. The North also experiences varying prices: Abuja, Kaduna, and several other states pay N950, while states like Zamfara, Kano, and Borno pay the highest price of N960.
This Free Carrier Agreement (FCA) price, essentially the cost marketers pay before selling fuel, mirrors the regional price variations. Lagos has the lowest FCA price at N905 per litre, while some northern states like Borno, Taraba, and Adamawa have significantly lower FCA prices around N888 per litre, suggesting higher transportation costs contribute to their higher pump prices. The underlying reason behind the Dangote Refinery’s suspension of naira-based transactions lies in a discrepancy between the crude oil allocations paid for in naira and the actual sales volume.
The Nigerian National Petroleum Company Limited (NNPCL) reportedly allocated substantial volumes of crude oil to its foreign creditors as loan repayment, disrupting the naira-for-crude arrangement with the Dangote Refinery. This forced the refinery to temporarily halt its naira transactions, creating a void in the market. This vacuum has allowed private depot owners to capitalize on the situation by increasing their prices, maximizing their profits at the expense of consumers. The repercussions of these price increases are far-reaching. Transport costs are expected to surge, leading to a domino effect on the prices of goods and services across the country. This inflationary pressure will further burden Nigerian consumers already grappling with economic challenges.
The current scenario also highlights the struggles faced by independent marketers, particularly with foreign exchange rates and distribution expenses, impacting fuel availability in certain areas. The suspension of the naira-for-crude deal has essentially opened the floodgates for free importation of petroleum products. However, this seemingly open market is dominated by private depot owners who are leveraging the situation to inflate prices for maximum profit, further exacerbating the challenges faced by independent marketers. This pricing dynamic contributes to the overall instability in the fuel market, creating an environment where prices can fluctuate significantly.
Industry experts anticipate that price stabilization will only occur when the Dangote Refinery resumes its naira-denominated fuel sales, contingent upon securing a stable crude oil supply from NNPC. Until this critical issue is resolved, Nigerian consumers will continue to bear the brunt of higher fuel costs, impacting their daily lives and the overall economy. The resumption of naira sales by the Dangote Refinery is crucial not only for market stability but also for the long-term viability of the naira-for-crude initiative, which has the potential to strengthen the Nigerian currency and boost local refining capacity. The current predicament underscores the need for a swift resolution to the crude oil allocation issue between NNPCL and the Dangote Refinery, ultimately relieving the burden on Nigerian consumers.
