The question of why Nigerians should pay as much as 1,400 naira per liter for petrol in a country rich in crude oil and boasting a significant refining capacity is a complex issue that requires a deep understanding of both global and local economic dynamics. It also demands a frank discussion about the challenges we face and the possible paths forward. As citizens, we must seek clarity and accountability from those responsible for setting these prices and managing our national resources.
Let us first consider the nature of the costs involved in producing and distributing petrol within Nigeria. Although we are blessed with abundant crude oil, the reality is that the journey from crude extraction to refined fuel at our local petrol stations is fraught with inefficiencies and additional costs. Despite having four state-owned refineries with a combined capacity of 445,000 barrels per day, Nigeria’s refining sector has long been plagued by mismanagement, corruption, underperformance, and chronic underinvestment. As a result, these refineries have intentionally operated far below their capacities, necessitating the importation of refined products to meet domestic demand. This dependency on imports means we are still vulnerable to global price fluctuations, despite having significant crude reserves.
The much-anticipated Dangote Refinery, with a capacity of 650,000 barrels per day, was expected to be a game changer. Yet, while it promises to meet not only Nigeria’s but also West Africa’s fuel needs, the refinery’s costs of operation, including the cost of crude, labor, and energy, remain high. The sale of crude to local refineries in naira, recently approved by the Federal Executive Council, aims to reduce costs associated with foreign exchange and stabilize petrol prices. However, this policy’s effectiveness will depend on its consistent implementation and the ability of local refineries to ramp up production to meet demand without relying on imports.
Now, consider the distribution costs. The path from refineries to filling stations involves pipelines, depots, and trucks. In Nigeria, where pipeline vandalism and oil theft are rampant, transporting fuel safely and efficiently is a costly affair. The state of our roads and the added security costs to guard against theft and vandalism further inflate the distribution costs. These costs are inevitably passed down to consumers, contributing to the high prices at the pump.
The situation becomes even more perplexing when we draw comparisons with other countries. In the United Kingdom, for instance, petrol is sold at around £1.49 per liter, which is roughly equivalent to 2,800 naira. However, it is essential to note that the UK’s fuel price includes a significant tax component. Unlike Nigeria, which until recently subsidized fuel to keep prices low, the UK’s fuel prices reflect both market costs and hefty government taxes designed to curb consumption and fund public services. In contrast, Nigeria’s recent move away from subsidies has exposed the true market cost of petrol, influenced by inefficiencies in our refining and distribution systems.
It is also crucial to understand the role of the Nigerian National Petroleum Company Limited (NNPC) in this pricing equation. For decades, the NNPC has been the sole importer of petrol with its attendant corrupt practices, and has borne the responsibility of setting prices in line with government policies. This role often involved balancing market forces with the need to provide affordable fuel to Nigerians. However, with the removal of subsidies and a shift towards a market-driven pricing model, the NNPC is now more inclined to adjust prices to reflect actual supply and demand costs. This shift is necessary to reduce the financial strain on the government, which has been shouldering a massive subsidy bill at the expense of other critical areas like healthcare and education.
Yet, we must ask ourselves: how do we justify a price of 1,400 naira per liter when our fuel is supposedly refined locally? The answer lies not in simple comparisons but in a detailed examination of the entire supply chain, from crude extraction to refining and distribution. It also lies in addressing the systemic inefficiencies that continue to plague our energy sector. We must demand transparency in how these prices are calculated and seek accountability from those managing our resources. We need our economists to wade in and expain this anomaly to us lest we risk another wave of protests.
The call to Nigerians, therefore, is not just to brace for higher petrol prices but to demand a better understanding of why these prices are what they are. We must push for reforms that address the root causes of inefficiency and corruption in the oil sector. Moreover, we need policies that encourage investment in infrastructure and technology to improve the refining capacity and distribution network. By doing so, we can ensure a more stable and affordable fuel supply for all Nigerians.
Ultimately, while the rising cost of petrol may seem daunting, it is a reflection of broader economic realities and challenges. However, with greater transparency, accountability, and strategic reforms, we can build a more efficient and sustainable energy sector that serves the best interests of all Nigerians. The journey ahead is not just about adjusting to higher prices but about transforming our approach to managing our abundant resources for the collective good.
Hon. Chima Nnadi -Oforgu
“Duruebube Uzii na Abosi”
OBLONG MEDIA UNLIMITED 
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