Follow Us on Google
Despite global crude oil prices retreating to levels seen before the Iran- US conflict, Nigerians are yet to experience relief at the pumps, with petroleum industry experts attributing the delay to supply chain realities, expensive inventories, exchange rate pressures and the structure of Nigeria’s downstream petroleum market.
The development has continued to worsen the economic hardship facing millions of Nigerians, many of whom had expected cheaper international crude prices to translate into lower petrol prices.
Instead, transport fares, food prices and other living costs remain elevated because petrol continues to sell at relatively high prices.
Prior to the Middle East crisis, petrol was retailing at N800 per litre. The price was however triggered to N1,500 at the height of the crisis when crude price rose to as much as $120 per barrel.
Ironically, petrol prices have failed to retreat to the pre- war levels even when crude oil prices have dropped to about $74 per barrel. The issue has also drawn international attention, with United States President Donald Trump recently urging major oil companies to lower fuel prices in line with the decline in crude oil prices.
Trump accused some producers of being reluctant to pass on the benefits of lower crude prices to consumers, reigniting debates about how quickly oil marketers should adjust retail prices when the global market softens.
However, Nigerian industry experts say the country’s situation is shaped by a combination of international and domestic market forces that prevent immediate reductions in pump prices.
Former Chairman of the Society of Petroleum Engineers (SPE), Nigeria Council, Mr. Joe Nwakuwe, said that despite the recent decline in global crude oil prices to levels recorded before the Middle East conflict, Nigerians may have to wait a little longer before enjoying lower petrol prices at filling stations.
Speaking during an interview, Nwakuwe explained that the apparent disconnect between falling crude oil prices and the continued high pump price of Premium Motor Spirit (PMS), popularly known as petrol, is largely due to inventory costs incurred by refiners and petroleum marketers.
According to him, petroleum products currently being sold in the market were refined or imported using crude oil purchased several weeks or months ago when international crude prices were significantly higher.
He noted that while crude oil prices have retreated to pre-war levels, petrol is still selling for between N1,200 and N1,250 per litre in some locations, compared to about N800 per litre before the geopolitical tensions.
Nwakuwe explained that refiners and marketers cannot immediately adjust pump prices simply because crude prices have declined.
“The products being sold today were produced from crude purchased weeks or even months ago at much higher prices. The pricing is based on the cost of that inventory, not today’s crude oil price,” he said.
He added that the benefits of lower crude oil prices would only begin to filter through after existing inventories acquired at higher costs have been exhausted and replaced with products refined from cheaper crude.
“The effect of declining crude prices takes time to work through the supply chain. Consumers will only begin to see reductions at the pumps after refiners and marketers clear old stock and introduce products refined with lower-cost crude,” he explaineThe petroleum engineer stressed that fuel pricing is determined by the average cost of inventory rather than the prevailing spot price of crude oil, noting that this explains the lag between movements in international oil prices and changes in domestic pump prices.
He expressed optimism that if crude oil prices remain low for a sustained period, motorists would eventually benefit from lower petrol prices as the market adjusts to the new cost realities.
Corroborating Nwakuwe’s position, immediate past Managing Director of 11 Plc (formerly Mobil Oil Nigeria), Mr. Tunji Oyebanji, said the delay should not be interpreted as an attempt by marketers to justify high prices but rather as a reflection of how petroleum pricing works globally.
According to him, the crude oil currently being processed by refineries was purchased when international prices were significantly higher.
He explained that even after crude prices fall, it takes time for the cheaper crude to arrive at refineries and another periodfore refined products eventually reach filling stations.
Oyebanji noted that petrol prices usually respond faster when crude oil prices rise because refiners immediately begin preparing for their next crude purchase.
Other News
“If a refinery has crude bought at $80 per barrel and international prices suddenly rise to $115, the refiner immediately adjusts product prices because it must raise enough cash to finance its next cargo,” he explained.
Conversely, when crude prices decline, refiners are still left with inventories purchased at the previous higher prices.
“They already have $115 crude in their tanks and naturally want to clear that stock before benefiting from cheaper $80 crude,” he said.
While acknowledging that market distortions and sharp practices may exist in some instances, Oyebanji maintained that prices would eventually decline once sufficient quantities of lower-cost refined products enter the market.
According to him, market competition remains the most effective mechanism for forcing prices downward.
He, therefore, supported allowing a measured level of petrol imports, arguing that importation helps keep domestic refineries competitive and discourages excessive pricing.
Also speaking, Mr. Ayodele Oni, Energy Policy Analyst and Partner at Bloomfield Law Practice, said there is an unavoidable lag built into Nigeria’s petroleum supply chain.
He explained that much of the petrol currently being sold across the country was imported weeks ago when Brent crude traded between about $84 and $120 per barrel.
According to him, Nigeria’s petrol import cycle typically lasts between six and eight weeks, making it practically impossible for marketers to immediately reflect lower international crude prices.
“No trader willingly sells at a loss simply to become the first to reduce pump prices,” he said.
Oni further disclosed that import permits for the July-to-September supply window had only recently been approved, meaning cheaper cargoes are yet to arrive in Nigeria.
He added that Nigeria’s relatively low national petrol stock estimated at about 16 days of supply is insufficient to create the competitive pressure required to force marketers into aggressive price reductions.
The energy policy expert also argued that local refining alone does not guarantee cheaper petrol.
According to him, crude supplied to domestic refineries is not always priced strictly in line with prevailing international crude benchmarks or exchange rates.
He added that several other cost components, including freight, marine insurance, storage, financing, regulatory charges and nationwide distribution costs remain largely dollar-denominated and therefore do not automatically decline simply because Brent crude prices have fallen.
Oni said the continued high pump prices have become particularly painful for Nigerians already struggling with inflation approaching 16 per cent.
He noted that while falling crude prices create expectations of immediate relief, ordinary Nigerians continue to face high transport fares and rising food prices because petrol remains expensive.
“The global headlines may suggest relief, but the Danfo fare and the dinner table tell a different story,” he said.
According to him, petrol influences virtually every sector of the economy through transportation and logistics, meaning the expected cost-of-living relief will only materialise after cheaper inventories replace existing expensive stock and the naira remains relatively stable.
