Despite a sustained decline in global crude oil prices in recent weeks, petrol prices across Nigerian filling stations have remained largely unchanged, raising concerns among consumers and industry stakeholders over the effectiveness of the country’s deregulated downstream petroleum sector.
Speaking during an interview, economist Dr. Louis Ogbeifun attributed the disconnect between falling crude oil prices and stable pump prices to a combination of market practices, limited domestic refining capacity, high logistics costs and inadequate competition in the downstream sector.
According to him, marketers often respond quickly when international crude oil prices or foreign exchange rates increase by raising pump prices. However, when crude oil prices fall, reductions at filling stations are usually delayed as marketers seek to recover the cost of existing inventories purchased at higher prices.
Dr. Ogbeifun noted that while the Nigerian National Petroleum Company Limited (NNPCL) and the Dangote Refinery have reduced petrol prices on several occasions, many Nigerians expected further reductions following the recent drop in global crude oil prices. He stressed that a deregulated market should not prevent government from protecting consumers against excessive profiteering and ensuring that market gains are passed on to the public.
He cited examples from countries such as Indonesia, Brazil, India, Kenya, South Africa, France and the United Kingdom, where governments adopted measures including tax reductions, fuel subsidies, transport support programmes and other interventions to cushion citizens from volatile energy prices. According to him, Nigeria can draw valuable lessons from these countries by developing policies that balance market liberalisation with consumer protection.
The economist also identified several structural challenges responsible for keeping fuel prices high despite favourable movements in international oil markets. These include poor road infrastructure, the continued transportation of petroleum products by road rather than pipelines, rising insurance premiums, expensive vehicle maintenance and the high cost of importing spare parts for fuel tankers. He explained that these operating expenses are ultimately transferred to consumers through higher pump prices.
On taxation, Dr. Ogbeifun warned that levies, Value Added Tax (VAT) and other regulatory charges imposed across the petroleum value chain inevitably increase the final price paid by consumers. He argued that taxes placed on producers, distributors and retailers are rarely absorbed by businesses but are instead reflected in pump prices. He urged government to carefully review petroleum-related taxes and levies to avoid worsening the financial burden on Nigerians already grappling with high living costs.
Dr. Ogbeifun maintained that Nigeria’s biggest long-term solution lies in significantly expanding domestic refining capacity. While describing the Dangote Refinery as a major step forward in reducing dependence on imported petroleum products, he said one operational refinery is insufficient for a country of more than 200 million people. He warned that should the refinery undergo routine maintenance, supply disruptions could once again expose Nigeria to fuel shortages and price volatility.
He therefore called for the rehabilitation and possible privatisation of Nigeria’s government-owned refineries under a transparent and competitive framework, arguing that increased competition among multiple refiners would naturally drive down prices and improve efficiency. He added that Nigeria possesses the technical expertise required to operate modern refineries successfully and should focus on restoring existing facilities rather than abandoning them.
The economist also urged Nigeria to move beyond exporting crude oil as a raw commodity by investing more in local refining and value addition. According to him, exporting refined petroleum products instead of crude oil would generate more foreign exchange, strengthen the naira, improve energy security and reduce the country’s dependence on imported fuels.
Looking ahead, Dr. Ogbeifun said geopolitical developments, particularly tensions in the Middle East and uncertainties surrounding shipping routes through the Strait of Hormuz, will continue to influence global oil prices in the coming months. Although he does not expect petrol prices in Nigeria to rise sharply in the immediate future, he said consumers should also not anticipate a significant drop below current levels, given existing market realities and Nigeria’s continued reliance on imported petroleum products to complement local refining.
He urged fuel marketers to exercise restraint in pricing decisions and remain mindful of the economic hardship facing millions of Nigerians. He also appealed to the Nigerian National Petroleum Company Limited to accelerate efforts to restore the country’s refineries while encouraging government to improve maintenance culture, strengthen regulatory oversight and deepen competition in the downstream petroleum sector.
According to Dr. Ogbeifun, greater transparency in pricing, improved refining capacity and well-targeted government reforms remain the most sustainable path toward delivering affordable fuel and long-term energy security for Nigeria.
