One of the enduring frustrations of Nigerians is the seemingly one-sided trajectory of petrol prices. Whenever international crude oil prices rise or the naira depreciates, petroleum marketers are quick to jerk up pump prices.
Yet when crude oil prices decline significantly, Nigerians rarely enjoy corresponding reductions at filling stations. The result is a widespread perception that the market works only in one direction: against consumers!
Oil prices had surged above $100 per barrel during the blistering conflict between the United States of America and Iran, which began in February, reaching as high as $120 per barrel at some points, contributing to higher fuel prices across global markets at the heights of the hostilities.
But the prices reportedly fell from $76.75 per barrel last Tuesday to $73.50 per barrel last Wednesday. The prices traded for $70 as at Thursday, the lowest since the Middle East crisis began in February. This followed the de-escalation of tensions, culminating in the signing of a ceasefire agreement between the two countries. It also spurred expectations that oil exports through the Strait of Hormuz will gradually normalize.
But the gain has, as usual, not trickled down to end users as expected, as pump prices are yet to drop in line with the latest crude oil rates. Many filling stations in major cities were still selling petrol at an average of N1,205 per litre as at Thursday.
Highly flummoxed stakeholders in the downstream sector have taken umbrage at this disproportionate price movement. They are imploring refiners, depot owners and fuel importers to adjust their prices downward to reflect the new realities.
The Petroleum Products Retail Outlets Owners Association of Nigeria, (PETROAN), through its National President, Billy Gillis-Harry, contends that the recent decline in global crude oil prices presents an opportunity for stakeholders in the downstream petroleum sector to pass the benefits of lower crude oil costs to Nigerian consumers.
It emphasizes that market realities should be reflected in both ex-depot and retail pump prices in the interest of fairness and economic relief for the public. It expresses concern that, in some instances, the landing cost of imported petroleum products appears to be lower than the prices offered by domestic refiners.
Let us, however, cut Dangote Refinery some slack for announcing reduction in its ex- gantry price for petrol from N1, 175 per litre to N1,125 per litre. It also reduced coastal supply price from N1,495,215 per metric tonne to N1,428,165 per metric tonne. The company attributed the reduction to the decline in global crude oil prices due to the easing of tensions in the Middle East.
The unfair pricing debacle appears to be a global affair. The United States President, Donald Trump, has accused US oil firms of petrol price gouging, directing the Department of Justice (DOJ) to probe oil marketing companies.
Price gouging is the tendency to raise prices on essential goods or services to an unfair or unreasonably high level during emergencies like natural disasters or pandemics, exploiting desperate consumers.
Trump said oil majors have refused to lower petrol pump prices despite sharp reduction in global crude oil prices. In a post on Truth Social, he said fuel prices must drop significantly faster than current market trends.
The US President said: “The big oil companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for oil.
“Those prices are dropping like a rock! In other words, customers are being gouged. I have instructed the DOJ to immediately start looking into this. Gasoline prices better start going down a lot faster than what I’m seeing.”
The one-sided price phenomenon has become even more noticeable since the removal of petrol subsidy in May 2023 and the transition towards a deregulated downstream petroleum market. Nigerians were assured that deregulation would allow prices to reflect market realities, encourage competition, improve efficiency and eventually deliver fairer pricing. While consumers have witnessed the upward adjustments expected in a deregulated market, downward adjustments have been slower, smaller and less frequent.
The question therefore remains: Why does petrol pricing in Nigeria behave like a rocket on the way up and a feather on the way down? The concern is not merely emotional. It goes to the heart of market transparency, consumer protection, inflation management and confidence in economic reforms.
Historically, Nigeria operated a regulated pricing regime in which the Federal Government determined petrol prices regardless of developments in the international oil market. During those years, pump prices changed mainly because of government policy rather than market forces. However, successive administrations gradually liberalised the sector, culminating in the removal of petrol subsidy in 2023.
Today, marketers frequently explain that petrol prices are determined by a combination of international crude oil prices, exchange rates, shipping costs, insurance, financing costs, depot charges and distribution expenses. On paper, this explanation is economically sound.
In practice, however, consumers observe a different pattern. Whenever Brent crude rises by a few dollars per barrel or the naira weakens against the dollar, pump prices are adjusted almost immediately. But when crude prices retreat, marketers often argue that they must first exhaust existing stock purchased at higher prices before reducing prices. Sometimes they point to exchange-rate instability or rising logistics costs as justification for maintaining high prices.
While these explanations have some merit, Nigerians increasingly believe they are applied selectively. Several episodes illustrate this perception. In 2016, following increases in international petroleum costs and supply challenges, petrol prices were raised from ₦87 to ₦145 per litre.
During the subsidy reform period of 2020, pump prices moved several times in response to changing market conditions. Prices increased from around ₦123 to ₦151 and later to about ₦161–₦170 per litre as crude recovered and exchange-rate pressures intensified.
Following the removal of subsidy in May 2023, pump prices jumped from roughly ₦185 to about ₦488 per litre and later exceeded ₦600 as exchange-rate depreciation combined with import costs.
More recently, pump prices have experienced multiple upward adjustments whenever international supply conditions tightened or foreign exchange costs increased. Yet, the reverse has not been equally dramatic.
The most striking example occurred during the COVID-19 pandemic. Between early 2020 and April, 2020, international crude oil prices collapsed from above $60 per barrel to below $20, with U.S. benchmark prices even briefly turning negative.
Although Nigeria eventually reduced official petrol prices modestly, many marketers delayed implementation and reductions were significantly smaller than the collapse in crude prices would have suggested. Investigations at the time showed that many filling stations continued selling at previous prices despite official reductions.
The same pattern has been observed repeatedly under deregulation. When crude prices increase, announcements of higher pump prices are almost immediate. When crude prices decline, marketers often cite old inventory, exchange-rate volatility or supply uncertainties as reasons for maintaining existing prices.
Economists describe this phenomenon as “asymmetric price transmission” or the “rockets and feathers” effect. In many countries, retail fuel prices rise rapidly when wholesale costs increase but decline much more slowly when costs fall.
Several academic studies have documented this behaviour in petroleum markets around the world. The reasons include inventory replacement costs, imperfect competition, market concentration, information asymmetry and the tendency of consumers to notice increases more than delayed reductions.
According to industry experts, Nigeria unfortunately presents a fertile ground for such asymmetry. First is the exchange-rate volatility. Even when crude prices fall internationally, marketers may still pay more in naira if the domestic currency depreciates sharply. Since petroleum imports have historically been denominated in dollars, a weaker naira can offset savings from lower crude prices.
Second is inventory financing. Marketers legitimately argue that fuel already in storage was purchased at higher landing costs. Immediate reductions could force them to sell below replacement cost. While this explanation is reasonable for short periods, it becomes less convincing when high prices persist long after inventories should have been replenished at lower costs.
Third is inadequate competition. Although deregulation promises competition, Nigeria’s downstream market remains relatively concentrated.
Limited competition weakens pressure on marketers to reduce prices aggressively. Consumers have little choice because competing stations often adjust prices simultaneously.
Fourth is inadequate domestic refining.
Despite being one of Africa’s largest crude producers, Nigeria has historically imported much of its refined petrol. This exposes domestic prices to international freight costs, insurance charges, foreign exchange risks and global supply disruptions.
Although the commencement of operations at the Dangote Refinery offers hope, genuine price competition will depend on multiple suppliers, transparent crude allocation and efficient regulation rather than reliance on a single dominant refinery.
Fifth is weak market transparency.
Consumers rarely know the actual landing cost of imported fuel, marketers’ margins, depot prices or transportation costs. Without transparent pricing templates, suspicion naturally grows whenever prices remain high despite falling crude prices.
The consequences extend beyond motorists. Petrol prices affect transportation, food distribution, manufacturing, agriculture, telecommunications, healthcare and education. Every increase cascades through the economy.
Bus fares rise. Food becomes more expensive. Factories increase production costs. Inflation accelerates. Small businesses struggle. Households reduce consumption. Unfortunately, when petrol prices eventually decline, even marginally, the corresponding reductions in transport fares and commodity prices rarely occur.
This creates what economists call downward price rigidity. Prices rise quickly but become sticky on the way down. The result is cumulative inflation that permanently erodes household purchasing power.
The obvious question, therefore, is: how can the trend be reversed? First, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) should publish a transparent pricing framework at regular intervals showing crude prices, exchange rates, freight costs, depot prices, taxes, margins and distribution costs. Transparency discourages arbitrary pricing.
Second, regulators should intensify competition. No single importer, depot operator or refinery should dominate the market. It is PETROAN’s contention that the unfair pricing phenomenon underscores the need for a more competitive downstream petroleum market that guarantees consumers’ access to the most affordable products available.
To this end, the association implores NMDPRA to continue issuing import licences to qualified marketers so as to increase competition among suppliers, which would help moderate prices, discourage monopolistic tendencies and ensure a steady supply of petroleum products across the country. Greater competition, indeed, naturally pressures marketers to reduce prices.
In order to further encourage competition that will benefit consumers, PETROAN also urges the Group Chief Executive Officer of Nigerian National Petroleum Company Limited (NNPCL), Engr. Bayo Ojulari, to facilitate talks with the two Chinese firms that have expressed interest in operating the Port Harcourt and Warri Refineries.
Third, Nigeria must maximise domestic refining. Greater reliance on locally refined products reduces exposure to foreign shipping costs and external supply shocks. However, domestic refining alone is not enough. Crude supplied to local refineries must itself be competitively priced.
Fourth, exchange-rate stability remains essential. As long as marketers purchase crude or refined products using increasingly expensive dollars, pump prices will remain vulnerable regardless of international oil prices.
Macroeconomic stability, therefore, matters just as much as developments in global energy markets.
Fifth, consumer protection agencies, especially the Federal Competition & Consumer Protection Commission (FCCPC), should actively monitor anti-competitive behaviour. Where evidence suggests coordinated pricing or unjustified delays in passing cost reductions to consumers, regulators should investigate promptly.
Mercifully, the commission has expressed concern over findings from an ongoing surveillance of the downstream petroleum market suggesting undue exploitation of consumers.
The FCCPC, in a statement, said a review of the gantry prices of local refiners, marketers, depot operators and retail outlet operators revealed token reductions in prices that are not commensurate with the steep fall in crude prices in the global market.
The Executive Vice Chairman and Chief Executive Officer of the FCCPC, Mr. Tunji Bello, said the commission is “concerned that while dealers often respond swiftly by hiking pump prices whenever crude prices rise, it is curious that it is taking forever for consumers to benefit significantly when crude prices fall. Competitive markets must work fairly in both directions.”
Though acknowledging that domestic prices are influenced by a range of commercial and market factors, including refining costs, foreign exchange movements, logistics, financing and distribution expenses, the commission expects competitive market dynamics to have eased the swift transmission of resulting cost efficiencies to consumers.
“Market liberalisation does not diminish businesses’ obligations to compete fairly or consumers’ right to fair treatment. Where credible evidence indicates conduct that undermines competition, exploits consumers or otherwise contravenes the Federal Competition and Consumer Protection Act, the commission will investigate and take appropriate enforcement action,” Bello assures.
He encouraged consumers to continue reporting suspected anti-competitive conduct, misleading pricing practices and other forms of unfair market behaviour through the Commission’s established complaint channels.
Finally, Nigerians deserve consistent communication. If prices rise because crude oil has increased by 15 percent, consumers should equally expect reductions when market conditions improve. Market discipline must work both ways.
Deregulation should not become a convenient justification for permanent increases while temporary reductions disappear into opaque pricing structures. Markets function best when participants trust that gains and pains are shared fairly.
Nigeria’s petroleum sector stands at a historic turning point. With subsidy removal, increasing private-sector participation and expanding domestic refining capacity, the country has an opportunity to build a genuinely competitive fuel market.
But competition must be measured not merely by the freedom to raise prices. It must equally be demonstrated by the willingness to reduce prices whenever market conditions justify doing so.
Until Nigerians begin to experience the benefits of falling international crude prices as readily as they experience the pain of rising prices, scepticism about deregulation will remain. A market that responds only to bad news is not truly competitive. It is merely expensive.
The ultimate test of deregulation is not whether marketers can increase prices quickly. It is whether consumers also enjoy the rewards when costs decline. Only then will Nigerians believe that the downstream petroleum market is working for everyone rather than for a privileged few.
