By Niyi Jacobs
Nigerians are grappling with the paradox of rising fuel prices despite having two functional refineries—the Dangote Refinery and the Port Harcourt Refinery.
Many had hoped these facilities would bring relief from high fuel costs, but the reality has been starkly different. Instead of the anticipated drop in pump prices, Nigerians are now paying over ₦1,000 per litre for Premium Motor Spirit (PMS). This development has compounded economic hardships, leading to widespread frustration and a loss of confidence in the government’s ability to manage the nation’s energy sector.
The surge in fuel prices began in May 2023 when President Bola Ahmed Tinubu removed the long-standing fuel subsidy. The Nigerian National Petroleum Company Limited (NNPCL) immediately raised petrol prices from ₦195 to ₦557 per litre, citing the unsustainable cost of the ₦400 billion monthly subsidy. By June 2023, the price had risen further to ₦617 per litre due to “market dynamics,” and by September 2024, prices hovered between ₦855 and ₦897 per litre. The latest increase, crossing ₦1,030 per litre, followed NNPCL’s decision to allow marketers to transact directly with refineries.
Why Are Fuel Prices Still Rising?
The optimism surrounding the Dangote and Port Harcourt refineries was rooted in their potential to end Nigeria’s dependence on imported refined products. However, several factors have ensured that fuel prices remain high, even with local refining capacity.
- Inflation and Currency Depreciation
Nigeria’s inflation rate, which currently stands at 33.8%, has increased production costs across sectors. Additionally, crude oil is priced in U.S. dollars, meaning the depreciation of the naira has further inflated domestic pricing. This dynamic negates much of the cost-saving expected from local refining.
- Global Market Influences
NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, has attributed rising prices to global crude oil market dynamics. Even locally refined products are tied to international crude oil prices, leaving Nigerians vulnerable to fluctuations in global markets.
- High Refining and Logistics Costs
Refining crude oil domestically comes with significant overhead. The inefficiencies in transportation infrastructure further compound costs. With most logistics operations reliant on diesel, which is also expensive, the cost of moving refined products to markets remains high.
- Electricity Challenges
Nigeria’s chronic electricity deficit forces manufacturers and refineries to depend on diesel-powered generators, further increasing operational expenses. Until the energy sector is stabilized, the cost of refining will remain high, negating potential savings from local production.
Public Discontent
The rising cost of fuel has sparked widespread criticism across the country. Many Nigerians are questioning why the existence of two functional refineries has not translated into lower pump prices.
Hassan Alowonle, a Lagos resident, lamented, “Even with ten refineries, prices will keep rising unless the government reduces its dependence on crude oil revenue.” He believes the government’s reliance on oil exports is at the root of the problem.
Economist Augustine Oyiwona highlighted the disconnect between policy and reality. “The removal of import duties should have resulted in lower prices. However, inefficiencies in local production have offset any potential gains,” he argued.
Sylvester Agih, a trader in Abuja, expressed frustration over the paradox of higher prices despite functional refineries. “It defies logic that Nigerians are paying more now than when we imported refined products,” he said.
Economic Ripple Effects
The impact of high fuel prices has been far-reaching, intensifying economic hardship for Nigerians across all sectors. The cost of goods and services has soared as businesses pass on increased operational costs to consumers.
For small and medium-sized enterprises (SMEs), which form the backbone of the Nigerian economy, the cost of fuel has been particularly crippling. Many businesses rely on fuel-powered generators due to the unreliable power supply, and the soaring fuel prices have led to higher production costs, reduced profitability, and, in some cases, business closures.
The situation has disproportionately affected low-income households, who now face higher transportation and food costs. As Ameh Anthony, a social commentator, noted, “It is ironic that Nigerians, owners of abundant crude oil resources, face worsening hardship due to high petrol prices.”
Government Criticism and Calls for Reform
The government’s handling of the fuel crisis has drawn significant criticism. Many Nigerians feel that the removal of subsidies and the deregulation of the oil sector were implemented without adequate planning or safeguards to cushion the economic impact.
The administration has been accused of failing to provide a clear roadmap for managing the savings from subsidy removal. Critics argue that these funds should have been reinvested in infrastructure, healthcare, and education to offset the economic burden on citizens.
Proposed Solutions
Experts and stakeholders have suggested several measures to address the ongoing fuel crisis and its economic fallout.
- Adjusting Crude Oil Pricing for Local Refineries
Policy analyst Adams Ali proposed that the government should sell crude oil to local refineries at discounted rates. This would allow them to refine fuel at lower costs and reduce pump prices, alleviating the financial strain on Nigerians.
- Improving Operational Efficiency
Transparency and accountability in refinery operations are crucial. Nigerians are demanding detailed explanations for the continuous price hikes and evidence of how subsidy savings are being utilized. Establishing efficient supply chains and reducing waste in the refining process could also help lower costs.
- Diversifying Revenue Sources
The government must reduce its reliance on crude oil revenue and explore other sources of income, such as solid minerals, agriculture, and technology. Diversifying the economy will provide a more stable revenue base and reduce the impact of global oil price fluctuations.
- Reintroducing Targeted Subsidies
Some experts have called for the reintroduction of subsidies, albeit in a targeted manner. Such a scheme would focus on supporting the most vulnerable citizens while ensuring sustainability.
- Enhancing Infrastructure
Investing in transportation and energy infrastructure could significantly reduce the cost of refining and distributing fuel. Improving the national grid and reducing reliance on diesel generators would also lower production costs.
Conclusion
Nigeria’s current fuel crisis underscores the systemic inefficiencies in the country’s energy sector and the broader economy. The operationalization of the Dangote and Port Harcourt refineries was a significant milestone, but it has not delivered the expected benefits. Instead, Nigerians are facing higher prices, reduced purchasing power, and deepening economic hardship.
The government must act swiftly to implement reforms that address the root causes of the crisis. Transparency, accountability, and targeted policy measures are essential to restoring public trust and alleviating the economic burden on citizens.
Without decisive action, the rising cost of fuel risks further eroding confidence in the government and exacerbating the already dire economic conditions facing millions of Nigerians.
