Global oil prices slipped to around $68 per barrel on June 25, 2025, falling sharply from nearly $80 during a recent spike triggered by Israel-Iran tensions. This drop has not only reignited volatility in international energy markets but also exposed Nigeria’s economic vulnerability, especially given that the country’s 2025 national budget was premised on a $75 per barrel oil price benchmark.

This unexpected price reversal carries far-reaching implications for Nigeria’s downstream oil sector, fuel pricing stability, and the future of state-owned refineries. It also underscores the need for a more competitive, transparent, and deregulated petroleum industry that protects consumer interests while encouraging investment and efficiency.

Oil Market Volatility: A Lesson in Budget Prudence

The conflict between Israel and Iran temporarily jolted oil prices upward, creating an illusion of sustained high revenue for oil-exporting nations like Nigeria. However, as tensions cooled—thanks largely to a truce reportedly brokered by U.S. President Donald Trump after American airstrikes on Iranian nuclear infrastructure—oil prices quickly dropped back below the $70 range.

This swift price reversal has once again highlighted the dangers of optimistic budget forecasting based on volatile global crude markets. For Nigeria, which heavily relies on oil revenue, the development suggests that future budget planners should adopt more conservative oil price benchmarks, possibly below $70, to shield the economy from revenue shortfalls and fiscal shocks.

Petrol Prices Surge, Then Ease: Dangote Refinery’s Role

While geopolitical tensions were pushing oil prices upward, local petrol prices in Nigeria surged beyond ₦900 per litre, driven largely by price adjustments from the Dangote Refinery, the nation’s largest and most recently operational private refinery.

Although Dangote later reduced petrol prices by ₦40, and the NNPC (Nigerian National Petroleum Company Limited), its chief competitor, followed suit shortly afterward, the price fluctuations exposed the fragile balance in Nigeria’s fuel pricing structure.

Currently, the non-functionality of state-owned refineries like Port Harcourt and Warri has left Dangote with a near-monopoly in the refining space. This power dynamic gives the private refinery outsized influence on pump prices, distribution timelines, and supply volumes—raising questions about market fairness and competition.

A Bold Distribution Plan with CNG Tankers

In a bid to resolve distribution inefficiencies and reduce dependence on third-party marketers, Dangote Refinery announced the deployment of 4,000 compressed natural gas (CNG)-powered tankers. This ₦1.07 trillion investment aims to minimize the role of intermediaries, enhance fuel logistics, and contribute to environmental sustainability by reducing carbon emissions.

The move is expected to benefit approximately 42 million micro, small, and medium enterprises (MSMEs) nationwide, while also promising to lower end-user fuel prices. However, this aggressive expansion has sparked fears among smaller players in the distribution sector.

Concerns Over a Fuel Distribution Monopoly

The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has voiced deep concern, suggesting that Dangote’s entry into large-scale distribution could create a de facto monopoly. The association warns that such dominance could lead to job losses, business closures, and price manipulation over time.

While competition can drive down prices and increase efficiency, it must operate within a level regulatory playing field. To prevent anti-competitive practices, the Federal Competition and Consumer Protection Commission (FCCPC) must step in proactively to monitor compliance with antitrust laws and ensure equal opportunities for all players.

Likewise, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) must intensify oversight and ensure transparent fuel pricing that accurately reflects global market trends. Refiners must be held accountable—not just for increasing prices during oil surges, but for promptly reducing prices when crude costs decline.

The State of Public Refineries and Urgent Reforms

The dominance of Dangote Refinery has been made easier by the persistent failure of government-owned refineries. Despite spending more than $20 billion over several decades on their rehabilitation, Port Harcourt, Warri, and Kaduna refineries remain largely unproductive.

This glaring inefficiency underlines the urgent need for privatisation. The combined refining capacity of 445,000 barrels per day could be harnessed more effectively by experienced private investors. By divesting its stakes, the government would not only save money but would also introduce competition that is currently missing in the sector.

Until the local refining market becomes fully competitive, the federal government may have to temporarily permit fuel importation, ensuring that consumers are not held hostage by a single dominant supplier.

Encouraging New Refineries and Private Investment

Apart from strengthening existing assets, the federal government should accelerate support for new players. A prime example is the BUA Group’s 200,000 barrels-per-day refinery project, which is currently under construction. To avoid repeating past mistakes, this facility should receive institutional and policy support similar to what was offered to the Dangote Refinery.

Once operational, the BUA refinery could serve as a counterbalance to Dangote’s market dominance, pushing the downstream sector toward a truly liberalized, efficient state.

The Bigger Picture: Strengthening the Naira

Amid fuel pricing and refining concerns, the Naira’s value remains another cornerstone of Nigeria’s economic health. Rather than merely celebrating brief periods of currency stability, the goal should be sustainable currency appreciation.

This can only be achieved through a mix of strategic economic policies, including:

• Attracting foreign direct investment (FDI) by improving ease of doing business.

• Supporting local manufacturers to scale production and export.

• Encouraging a culture of made-in-Nigeria goods and services through policy and procurement strategies.

By creating a more productive and export-oriented economy, the Naira will gain strength, ultimately reducing Nigeria’s import dependency—including on fuel—and improving the purchasing power of its citizens.

Conclusion: A Roadmap for Reform

The recent drop in global oil prices, combined with domestic fuel pricing volatility and refining sector monopolization, paints a clear picture: Nigeria must reform its downstream oil industry.

Key steps include:

• Adopting conservative oil price benchmarks in future budgets.

• Privatising unproductive state-owned refineries.

• Ensuring fair market competition through regulatory oversight.

• Encouraging new investments in refining and distribution infrastructure.

• Stabilising the Naira through export growth and manufacturing support.

With the right reforms and a balanced approach to public-private partnerships, Nigeria can finally achieve the vision of an efficient, competitive, and consumer-friendly energy sector—one that benefits every Nigerian, not just a few dominant players.