By Patrick Oludare
Every time a Nigerian motorist winces at the fuel pump, every time a market woman raises the price of tomatoes because transport costs have doubled, and every time a factory owner shuts down production because diesel has become unaffordable, Nigeria is living a bizarre contradiction.
We are selling our own crude oil in dollars in the international market, then buying back refined products in dollars at international prices. It is like a farmer selling his yams at the market, then buying yams from his neighbour at a higher price to feed his family. This madness must end.
Nigeria does not have to accept the full international dollar cost of its own crude oil when that crude is being used to produce essential energy products for Nigerians. The solution is simpler than most policymakers admit: price crude oil allocated to domestic refineries at a special rate of ₦1 to $1.
Let me be crystal clear: this does not mean changing Nigeria’s general exchange rate to ₦1/$. The ordinary foreign-exchange market would continue operating normally. Imports, exports, remittances and foreign investment would remain subject to the prevailing market rate.
The ₦1/$ mechanism would exist only inside the domestic crude-to-products value chain. It is a sector-specific domestic pricing mechanism, not a general exchange-rate policy.
Here is how it works
Under a Domestic Crude Allocation framework, crude oil assigned to qualifying refineries in Nigeria—whether Dangote, PHRC, WRPC, KRPC or modular refineries—would be transferred at this special ₦1/$ domestic valuation.
Using our current reference exchange rate of approximately ₦1,360/$, the mathematical impact on the final refined product prices is staggering. Take diesel, currently selling at around ₦1,900 per litre. At the market rate, that represents roughly 1.40. Under the ₦1/$ domestic valuation across the value chain, the final refined price becomes approximately ₦1.40 per litre.
For petrol, currently at around ₦1,260 per litre (roughly $0.93), the final refined price becomes approximately 93 kobo per litre.
Aviation fuel is currently sold at N1600 but with N1/$ exchange rate, the retail price of aviation fuel falls to N1.18 per litre.
Similarly, the retail price of cooking gas falls to N1.10 per kg from the current price of N1500 with N1/$ rate.
Let me emphasise: these are not just theoretical feedstock costs. Under this framework, these represent the final, stabilised retail prices after refining, because the entire domestic value chain is decoupled from artificial dollar-denominated inflaRate.
This is not a petrol subsidy. It is a Full Barrel Industrial Revolution.
When a refinery processes crude, it produces a basket of products: PMS for cars and motorcycles, AGO/diesel for trucks and factories, DPK/kerosene for households, aviation turbine fuel for air transport, LPG for cooking, and other industrial products.
By making the crude input cheap, multiple energy products become cheaper simultaneously. This creates a chain reaction through the entire economy.
Cheap crude flows to refineries. Lower feedstock costs reduce ex-refinery prices. Cheaper PMS, AGO and aviation fuel reduce transportation costs. Lower transport costs reduce logistics expenses. Cheaper logistics make agriculture, manufacturing and food distribution radically more affordable.
The result? Lower food prices. Lower manufacturing costs. Higher purchasing power for Nigerian households.
Consider diesel alone. Nigerian businesses use it for factories, trucks, agricultural machinery, construction equipment, generators, logistics, telecommunications infrastructure and commercial facilities. When diesel is expensive, every stage of production becomes expensive.
A dramatic reduction in diesel costs does not merely benefit diesel consumers. It reduces the cost of producing almost everything. A manufacturer who spends millions on diesel today could redirect that expenditure toward hiring workers, purchasing machinery, expanding production or reducing product prices.
This is where the policy becomes an industrial policy, not simply an energy policy.
The same logic applies to food security. Food prices are heavily influenced by production, harvesting, processing, storage, transportation and distribution. Energy enters almost every stage. A farmer needs energy. A processor needs energy. A truck needs fuel. A warehouse needs electricity.
Cheap energy becomes cheap food.
The government would not have to permanently subsidise every bag of rice, maize or tomatoes. Instead, it would attack one of the fundamental cost inputs behind the entire food system.
Now, some critics ask: “What about foreign exchange earnings? Won’t this starve the country of vital dollars?”
This is where the mathematics of our production reality completely silences the doubt. Nigeria currently produces roughly 1.6 million barrels of crude oil daily. Meanwhile, our total national domestic consumption for refining sits between 300,000 to 450,000 barrels per day.
By ring-fencing this specific domestic volume (300,000 to 450,000 barrels) for local refining at the ₦1/$ valuation, over 70% of Nigeria’s total daily production continues to be exported directly to the international market at full, uncompromised global dollar prices. NNPC and our joint-venture partners will still earn massive, sufficient foreign exchange to service external obligations and back our reserves.
We are not sacrificing our export earnings; we are simply carving out a secure, localised domestic energy ring-fence from our abundant total output.
To ensure this ring-fence remains completely secure, the framework includes robust, non-negotiable safeguards:
Domestic-use restriction: Only crude demonstrably allocated to qualifying domestic refining receives the special valuation.
Digital accounting: Every barrel is electronically tracked from upstream production through refinery receipt and final product output.
No uncontrolled arbitrage: Strict legal and operational rules prevent diversion of benefits into crude exports or unauthorised resale.
Transparent product pricing: The public can see the full, audited chain from crude transfer price to final retail price.
Competitive refining: Multiple qualifying refineries participate to prevent monopoly and ensure efficiency.
Independent auditing: The system is independently audited to ensure benefits reach domestic consumers and productive sectors.
Most importantly, this is not about pretending that ₦1 equals $1 everywhere. It is about ensuring that Nigeria’s own crude works harder for Nigerians.
For too long, Nigeria has treated crude primarily as a source of foreign exchange and government revenue for importing goods. The proposed model adds another function: crude → cheap domestic energy → cheap production → industrialisation → employment → exports → higher domestic income.
This is a fundamental change in economic philosophy.
The question we must answer is this: Why should an oil-producing nation expose every domestic productive activity to the full foreign-currency cost of its own raw energy resource?
The purpose of this reform is to make crude oil serve as the energy foundation of Nigerian industrialisation.
The ultimate objective is not just cheap petrol. Cheap petrol is only the beginning.
The real objective is a cheaper Nigerian economy—one capable of producing more, employing more people, feeding itself more efficiently, exporting more goods and giving its citizens greater purchasing power.
Nigeria’s crude should not merely finance the economy. It should power the economy.
We have the crude. We have the refineries. Now we must have the policy framework to connect them.
Nigeria can be in joy. But only if we choose to make it so.
*Mr. Oludare is a systems architect, technology innovator, and macroeconomic policy author. He serves as Chief Executive Officer at Pat-initiated Market, and writes from Akure, Ondo State.