When Will Falling Crude Deliver Cheaper Petrol?

Crude prices have fallen. So why is petrol still expensive? Consumers demand relief, while marketers insist on sustainable margins, reports Festus Akanbi

For millions of Nigerians, the recent decline in global crude oil prices has brought little relief at the filling station.

Although international oil prices have retreated sharply following the easing of tensions in the Middle East, the pump price of Premium Motor Spirit (PMS) has remained stubbornly high, rekindling debate over whether Nigeria’s deregulated downstream petroleum market is truly delivering the benefits of competition or merely protecting industry margins.

The controversy has drawn regulators, marketers, refiners, economists and consumer groups into a familiar argument: should petrol prices have fallen more rapidly in response to the drop in crude oil prices?

Consumers believe they have a strong case. Brent crude, which surged above $110 per barrel during the Middle East crisis, has since declined to about $70-$75 per barrel. Yet petrol continues to sell for around N1,200 per litre in many parts of the country, compared with N800-N900 before the crisis. The gap has reinforced public perception that marketers respond swiftly to rising costs but are reluctant to pass on the benefits of lower international prices.

The Federal Competition and Consumer Protection Commission (FCCPC) has acknowledged these concerns. Its Executive Vice Chairman and Chief Executive Officer, Tunji Bello, observed that while the commission does not regulate prices in a deregulated market, it would investigate any evidence of exploitative pricing or anti-competitive practices that undermine consumer welfare.

Similarly, the Minister of Finance and the Economy, Taiwo Oyedele, disclosed that the government is engaging marketers and regulators to ensure that changes in global crude prices are more transparently reflected in domestic pump prices. 

According to him, the challenge lies in protecting consumers without undermining operators’ commercial viability. Beneath the public debate, however, lies a more complex market reality.

Recent figures released by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) show that Nigeria’s petrol supply structure has changed significantly. In May 2026, total PMS supply averaged 47.4 million litres daily, compared with 44.4 million litres in April. Domestic refineries supplied 41.5 million litres, accounting for 87.6 per cent of total supply, while imports contributed 5.9 million litres, or 12.4 per cent.

The figures illustrate the remarkable shift brought about by increased local refining. Nearly nine out of every 10 litres of petrol consumed in Nigeria now come from domestic refineries. Nevertheless, imports continue to play a strategic role in bridging supply gaps and maintaining nationwide availability.

Ironically, petrol imports increased during the same period. Average daily imports rose by almost 60 per cent, from 3.7 million litres in April to 5.9 million litres in May, despite stronger domestic production.

Analysts attribute the increase to inventory replenishment, regional distribution requirements, and reduced crude deliveries to local refineries, rather than to any decline in refining capacity. Indeed, crude supplied to domestic refineries fell from 612,000 barrels per day in April to 578,000 barrels per day in May, highlighting the ongoing challenge of securing adequate feedstock.

Despite this increase, Nigeria’s reliance on imported fuel has fallen sharply. Imports averaged 24.8 million liters per day in January but declined to 5.9 million liters by May, representing a reduction of more than 76 percent over five months.

Regulators have nonetheless continued to approve strategic imports to maintain supply, particularly as national stock cover declined from 17.7 days in April to 16 days in May.

These developments reinforce the argument that petrol prices cannot respond immediately to falling crude prices. Former Chairman of the Major Oil Marketers Association of Nigeria, Adetunji Oyebanji, explains that refiners process crude purchased weeks earlier, often at much higher prices. Immediate price reductions would therefore compel them to sell below cost and incur heavy inventory losses.

According to him, when crude prices rise, refiners quickly adjust prices because they must finance subsequent cargoes at higher costs. Conversely, when prices fall, they must first dispose of existing inventories before lower-priced crude begins to influence production costs.

The same reasoning has featured prominently in discussions surrounding the Dangote Refinery. Energy economist Afolabi Olowookere argues that local refining does not automatically translate into cheaper petrol because domestic refiners purchase crude at international prices and remain exposed to exchange rate volatility, financing costs, logistics, and distribution expenses.

Other economists share this position. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, notes that petrol pricing in a deregulated market depends not only on crude oil prices but also on exchange rates, transportation costs, storage charges, financing expenses, and distribution margins. The Managing Director, Financial Derivatives Limited, Bismarck Rewane, similarly argues that foreign exchange remains a critical determinant because crude purchases, freight costs, and several operating expenses are denominated in United States dollars.

While these explanations are economically sound, they have done little to ease public frustration. Consumer groups insist that if marketers can raise prices almost immediately when crude prices rise, they should show similar urgency when international prices fall. Anything less, they argue, undermines confidence in deregulation and creates the impression that market forces operate only when they favour suppliers.

Nigeria’s experience is not unique. In the United States, concerns have also been raised over the slow transmission of falling crude prices to retail petrol prices. Industry experts maintain that inventories, refining costs, transportation expenses, taxes and seasonal demand often delay adjustments at the pump. The American experience demonstrates that slower price transmission is a common feature of petroleum markets, not an exclusively Nigerian problem.

Even so, competition remains the most effective safeguard against prolonged price rigidity. Recent import approvals granted to marketers such as AA Rano, Matrix Energy, Pinnacle Oil, AYM Shafa, Bono Energy and NIPCO, alongside the expansion of domestic refining capacity, are expected to intensify competition and gradually narrow profit margins. Ultimately, the debate reflects the growing pains of Nigeria’s transition from a subsidy-driven petroleum market to a liberalised one. Deregulation transfers pricing decisions from government to market participants, but it also requires transparency, robust competition and effective regulatory oversight.

Consumers are entitled to expect that lower crude oil prices will eventually translate into cheaper petrol. Equally, refiners and marketers must be allowed to recover legitimate commercial costs without being compelled to sell below production cost. Balancing these competing interests remains the central challenge for regulators. In the end, the true measure of deregulation will not be how quickly petrol prices rise during global shocks, but how effectively competition ensures that falling costs are passed on to consumers.