By David O. Tanure
Not a few Nigerians have been apprehensive since Dangote Petroleum Refinery announced a suspension of petroleum product sales in naira early this week. In a statement issued on March 19, 2025, the refinery explained that its sale of petroleum products in naira had exceeded the value of naira-denominated crude received, necessitating an adjustment in sales currency.
The company assured customers that once it receives an allocation of naira-denominated crude cargoes from the Nigerian National Petroleum Company (NNPC) Ltd, it will promptly resume fuel sales in the local currency.
The statement reads: “Dear Valued Customers, We wish to inform you that Dangote Petroleum Refinery has temporarily halted the sale of petroleum products in Naira. This decision is necessary to avoid a mismatch between our sales proceeds and our crude oil purchase obligations, which are currently denominated in U.S. dollars.
“As soon as we receive an allocation of Naira-denominated crude cargoes from NNPC, we will promptly resume petroleum product sales in Naira. We appreciate your understanding and cooperation during this period,” the company announced.
For proper context and perspective, the NNPCL and Dangote Refinery struck a deal in October 2024 to ensured that domestic refineries, including Dangote Refinery, get crude oil in the local currency to ensure availability, better pricing and reduced prices.
However, parties have not been able to renew the naira-for-crude deal entered into for obvious reason. Some of the reasons being that Dangote Refinery has allegedly not been supplying the needed refined product as expected by the NNPCL after receiving the crude in Naira value, thereby forcing the national oil company, which is statutorily saddled with the responsibility of making petrol available for Nigerians, to source for the commodity from elsewhere. This probably accounted for the latest news report that Nigerian petroleum product marketers and retailers imported 154 million litres of premium motor spirit or petrol from March 17 to March 23, 2025 according to the Nigeria Port Authority (NPA).
Additionally, it is a well-known fact that Nigeria will get more revenue when its crude is sold or exchanged in dollar than in Naira. For a country that has a N55 trillion budget to contend with in 2025, it is no brainer really that it should stick to dollar for crude.
Notwithstanding the reported import by marketers and retailers, a change of policy to dollar based pricing by Dangote Refinery, because of the fact that it is a major supplier of PMS to most filling stations nationwide, will certainly lead to an upward review of the price at filling stations of marketers that get supply from the refinery.
Importantly, the announced plan could pressure the naira to lose its stability. Petrol prices will become reliant on the exchange rate, crude oil price and other factors determining the landing cost.
It is, therefore, not surprising that the announcement by Dangote Refinery to sell petrol in dollar values has sparked significant debate among economists, policymakers, and the general populace in Nigeria. This move, while potentially beneficial for the refinery’s profitability, raises critical concerns regarding the implications for the Nigerian economy, particularly in terms of pricing, accessibility, and market competition.
Nigeria, a country rich in oil resources, has long struggled with fuel supply issues, leading to a reliance on imports to meet domestic demand. The establishment of Dangote Refinery, one of the largest in Africa, was seen as a turning point that could help the nation achieve self-sufficiency in fuel production. However, the decision to price PMS in dollars has now introduced a new layer of complexity to a market that was gradually stabilizing following healthy competition between it and the NNPCL.
One of the most immediate concerns regarding the sale of PMS in dollar values is the potential for artificial scarcity and inflated prices. The Nigerian economy is heavily dollarized, with many transactions and contracts tied to the U.S. dollar. By pricing petrol in dollars, Dangote Refinery may inadvertently create a situation where fuel becomes less accessible to the average Nigerian, particularly in a country where the majority of the population earns in naira.
As the naira continues to face depreciation against the dollar, the cost of petrol could rise significantly, leading to increased transportation costs and, consequently, higher prices for goods and services across the board. This inflationary pressure could exacerbate the already challenging economic conditions faced by many Nigerians, particularly the lower and middle classes, who may struggle to afford basic necessities.
In addition, the potential for Dangote Refinery to establish a monopoly in the Nigerian fuel market is another critical issue. With the refinery being one of the few large-scale producers of petrol in the country, its decision to sell PMS in dollars value could effectively limit competition. Smaller players in the market may find it difficult to compete with Dangote’s pricing strategy, especially if they are unable to source foreign currency at favorable rates.
This monopolistic tendency could lead to a lack of innovation and reduced service quality, as consumers would have fewer alternatives. In a market where competition drives improvements and keeps prices in check, the dominance of a single entity could stifle growth and lead to complacency. Furthermore, the absence of competitive pressure may result in a lack of responsiveness to consumer needs, ultimately harming the end-user.
The implications of this pricing strategy extend beyond individual consumers to local businesses that rely on fuel for their operations. Small and medium-sized enterprises (SMEs) are particularly vulnerable to fluctuations in fuel prices, as they often operate on thin margins. If the cost of petrol rises due to dollar value pricing, these businesses may be forced to pass on the increased costs to consumers, leading to a potential decrease in demand for their products and services.
Moreover, the ripple effect of higher fuel prices could lead to job losses, as businesses may be compelled to downsize or close altogether in response to reduced profitability. This scenario would further exacerbate the already high unemployment rates in Nigeria, creating a cycle of economic decline that could be difficult to reverse.
In the light of these potential challenges, it is crucial for the Nigerian government to intervene and establish a regulatory framework that ensures fair pricing and competition in the fuel market. Policy makers must consider measures to protect consumers from the adverse effects of dollar value pricing like is being contemplated by Dangote Refinery now. They may consider implementing price controls.
Additionally, fostering a competitive environment by encouraging the entry of new players into the market could help counteract the monopolistic tendencies of Dangote Refinery. By diversifying the fuel supply landscape, the government can enhance resilience against price shocks and ensure that consumers have access to affordable fuel options.
As a recap, the decision by Dangote Refinery to sell PMS in dollar values presents daunting challenges for Nigeria. While it may enhance the refinery’s profitability, the potential for artificial scarcity, high prices, and monopolistic behavior raises significant concerns. To safeguard the interests of consumers and local businesses, it is imperative for the Nigerian government to take proactive measures to regulate the market and promote competition. Only through a balanced approach can Nigeria navigate the complexities of this new pricing strategy and ensure a stable and equitable fuel supply for its citizens.