Can Nigerians Expect Affordable Fuel As Major Marketers Join NNPCL At Dangote Refinery?

BY ISAAC ASABOR*

Nigerians are holding their breath as major oil marketers join the Nigerian National Petroleum Company Limited (NNPCL) to lift fuel from the Dangote Refinery. This development, while initially viewed as a promising step towards stabilising fuel supply and lowering prices, has also raised concerns. Could this collaboration lead to more affordable fuel for everyday citizens, or will it result in higher prices and market instability?

The promise of Nigeria’s locally produced fuel has long been a source of hope for a country grappling with rising energy costs and the persistent threat of shortage. However, many fear that without a transparent, competitive market structure, Nigerians will continue to face exorbitant fuel prices and periodic shortages, despite the presence of one of the world’s largest refineries on their home soil.

It should be noted in this context that the Dangote Refinery, located in Lagos’ Lekki Free Trade Zone, was designed to be a game changer in Nigeria’s energy sector. With a refining capacity of 650,000 barrels per day, the refinery is Africa’s largest, and it is expected to produce enough refined petroleum products not only for local consumption but also for export throughout West Africa.

Despite being one of the world’s largest oil producers, Nigeria has been dependent on imported fuel for decades. This is primarily due to inefficiencies in its existing refineries and a lack of investment in domestic production. The country has lost billions of dollars in subsidies to keep imported fuel affordable for Nigerians; economists argue that this system is neither sustainable nor beneficial to the economy’s long-term health.

Enter the Dangote Refinery, which was supposed to change the tide by making Nigeria self-sufficient in petroleum refining. By producing fuel domestically, the country hoped to reduce its reliance on imports, save foreign exchange, and stabilise the domestic fuel market. The expectation was straightforward: cheaper, more readily available fuel for all Nigerians.

In a recent development, major fuel marketers joined NNPCL in removing fuel from the Dangote Refinery. This is significant because, historically, NNPCL (formerly NNPC) has been the primary regulator of fuel imports and distribution. Independent marketers are now sourcing fuel directly from refineries, raising hopes for increased market competition.

However, for many Nigerians, this development elicits mixed emotions. While competition between NNPCL and independent marketers could theoretically drive prices down and ensure a steady supply of fuel throughout the country, history has shown that Nigeria’s fuel market has rarely operated under ideal conditions. Instead, it has frequently been marred by price fixing, hoarding, and artificial scarcity, all to the detriment of the average consumer.

With marketers actively lifting fuel from the Dangote Refinery, concerns have been raised about the actual impact on fuel prices. Will the forces of demand and supply be allowed to operate freely, or will marketers continue to use the same tactics that have kept prices high and supply inconsistent for years?

This issue revolves around the concept of an ideal market structure. In such a market, prices are determined by competition among many sellers, and consumers benefit from competitive pricing and plentiful supply. However, Nigeria’s fuel market is notorious for operating in suboptimal conditions. Cartels, monopolies, and regulatory lapses have frequently conspired to keep fuel prices artificially high, even as global oil prices fall.

Major marketers joining NNPCL in lifting fuel from Dangote’s refinery should theoretically increase competition, lowering prices. However, without strong oversight from regulatory agencies, this scenario may not occur. Instead, there is genuine concern that these marketers may be working together, as they have in the past, to fix prices and manipulate supply.

Nigerians are already bracing themselves for the possibility that, despite increased domestic production, fuel prices will not fall as dramatically as expected. The lack of transparency in pricing mechanisms, combined with the possibility of price gouging by marketers, may keep fuel prices out of reach for many Nigerians. If this occurs, it would be a significant failure of the Dangote Refinery’s promise to provide affordable fuel to the masses.

Since the removal of fuel subsidies earlier this year, the price of petrol has skyrocketed, putting a significant strain on consumers. The price increase was a tough pill to swallow, but it came with the promise of eventual relief from local refining. The reasoning was simple: by producing fuel domestically and eliminating costly imports and subsidies, the cost of fuel would naturally fall.

However, the promise has yet to be fulfilled. Even as marketers begin to lift fuel from the Dangote Refinery, the price of petrol remains high, and the prospect of affordable fuel for ordinary Nigerians appears distant. The current reality is that consumers are paying significantly more at the pump while still dealing with intermittent shortages and supply issues.

The disconnect between the refinery’s promise and the current market reality has resulted in growing frustration. Many Nigerians are wondering what happened to the promise of affordable fuel. What happens in the future if major marketers do not cause the expected price drop?

For Nigerians to reap the benefits of locally refined fuel, there must be strong regulatory oversight to ensure that the market is fair. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) must play a key role in preventing price-fixing, hoarding, and other anti-competitive practices that could artificially raise prices.

Transparency is essential. Nigerians deserve to know how fuel prices are set and why the price at the pump remains high despite increased domestic production. The government must hold marketers accountable and ensure that the entire supply chain, from refinery to filling station, is efficient and fair.

Furthermore, there should be a push to increase Nigeria’s refining capacity beyond the Dangote Refinery. While the refinery is an impressive achievement, it cannot be the only solution to Nigeria’s fuel needs. Encouraging investment in new refineries and diversifying the market will help ensure that no single player dominates the sector and artificially raises prices.

Nigeria is at a critical juncture. With Africa’s largest refinery now operational on its soil, the country has an unprecedented opportunity to finally address its long-standing fuel crisis. But the question remains: will this opportunity be lost?

If the ideal market structure fails to emerge, and marketers continue to manipulate prices and supply, the average Nigerian’s hope for affordable fuel will be just that: a hope. The government, regulatory bodies and all stakeholders must work together to ensure that the Dangote Refinery’s promise does not become yet another missed opportunity.

As the country enters this new phase of fuel distribution, the stakes could not be higher. If the necessary steps are taken, Nigeria could soon have a stable and affordable fuel market. However, if history is any indication, the road ahead is fraught with difficulties.

Nigerians may continue to face high fuel prices and erratic supply unless an ideal market structure and strong regulatory oversight are implemented, despite having one of the world’s largest refineries in their backyard. For the time being, Nigerians must keep a close eye on the situation, hoping that the promise of affordable fuel does not slip away from us.