How Nigeria’s Dangote refinery is fuelling a petrol price war

Hey and welcome to Vitality Supply, coming to you from Houston, the place business leaders are assembly at CERAWeek, the most important vitality convention within the US.

The FT vitality crew hit the bottom working with an exclusive interview with the brand new US vitality secretary Chris Wright, who insisted President Donald Trump’s “drill, child, drill” agenda wouldn’t be derailed even when oil hit $50 a barrel.

The election of Trump was celebrated by the business as a result of his election guarantees to take away among the regulatory burdens imposed by a climate- centered Joe Biden. However at a non-public assembly, executives implored Wright to make sure the White Home took a steadier approach to policymaking after a number of weeks of backflips on points reminiscent of tariffs.

Chevron boss Mike Wirth later delivered this message in public from the convention stage: “Swinging from one excessive to a different is just not the correct coverage.” Chevron ought to know. Final month Trump cancelled the corporate’s licence to function in Venezuela, placing in danger its century-long presence within the nation.

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What’s fuelling Nigeria’s petrol value struggle?

How a lot is a litre of petrol price in Nigeria? It’s a query I asked on the pages of Energy Source in October quickly after billionaire industrialist Aliko Dangote’s 650,000-barrel-a-day refinery started producing the gasoline.

Dangote’s refinery has since gone on to ignite a value struggle in Nigeria’s downstream oil business, sparking fierce competitors amongst oil entrepreneurs promoting to price-sensitive remaining shoppers.

The Dangote refinery has reduce the value at which it sells to petrol distributors twice this yr within the span of roughly 5 weeks, from a peak of N950/litre ($0.63) initially of February to N825/litre ($0.55) in early March. These reductions have compelled state-owned oil firm NNPC, additionally the nation’s largest petrol provider, to reply with its personal value reductions to remain aggressive.

At petrol stations surveyed by Vitality Supply within the Ikoyi and Victoria Island districts of Lagos, gasoline now retails for N860/litre ($0.57) at a Dangote accomplice station, N865 ($0.57) at one other and N860 ($0.57) at NNPC’s shops.

Maybe for the primary time in Nigerian historical past, costs paid on the pump are reflective of the economics of provide and demand. A free-market strategy that was as soon as unthinkable simply two years in the past has taken root.

A number of components have performed a task within the aggressive pricing taking place in Nigeria, in line with Samuel Aladegbaye, an vitality analyst at Lagos-based monetary companies group Zedcrest. International oil costs have steadily dropped because the begin of 2025, with an anticipated glut in Opec+ provides sending Brent crude costs tumbling to as low as $68.33 final week, the bottom stage in additional than three years.

Considering international oil costs and change charges of the greenback to naira, the price of producing a litre of petrol in Nigeria could be about N740, Aladegbaye estimated, a wholesome margin for home producers given how a lot they promote to distributors and what remaining shoppers are at present paying.

“These costs are economically viable for these companies, however with a competitor [Dangote] available in the market, different corporations can not make irregular income as a result of there’s one other important occasion available in the market. It’s a pricing struggle . . . tied to the value of the commodity additionally dropping,” Aladegbaye stated.

In different phrases, what the Dangote refinery has achieved to the downstream oil sector in Nigeria is introduce a component of competitors in an business that was beforehand topic to the whims of a cartel of importers and distributors who had the ultimate say, or near it, on what petrol ought to price.

In an period the place the federal government of President Bola Tinubu has eliminated beneficiant however pricey gasoline subsidies, business gamers now need to compete on their very own deserves, with the protect of presidency largesse eliminated. For many years, Africa’s largest oil producer absorbed the true price of petrol, paying out billions of {dollars} to importers who then offered it to shoppers at government-approved costs. Nigerians loved among the world’s least expensive petrol. However in a rustic with low revenues, it was virtually unattainable to maintain the bonanza going — a system that many successive governments had flagged for being rife with fraud within the first place.

But the financial case for Dangote’s value struggle tells solely half the story. The Dangote Group has additionally twice decreased costs arbitrarily because it began producing petrol, first at Christmas, and in its most up-to-date reduce. The corporate’s personal assertion admits the latter discount was “strategic” and “to supply important reduction to Nigerians in anticipation of the upcoming Ramadan season [the Muslim holy month], whereas additionally supporting President Bola Ahmed Tinubu’s financial restoration coverage by assuaging the monetary burden on the Nigerian populace”.

It’s noteworthy that an organization that made the financial argument for reducing gasoline costs in early February has additionally made the tacit admission that it’s able to decreasing them when it fits its overarching goals. The Dangote Group declined to remark.

May Nigeria be swapping one period of monopoly for one more? It’s an allegation that Dangote has strenuously denied in the past, together with final yr after it was made by the head of Nigeria’s downstream business regulator. However Dangote’s critics usually level to his stranglehold on the nation’s cement business the place he controls greater than 60 per cent of the market.

“Sure, there’s latitude for them to scale back costs and a few of his opponents who import are going to be undercut,” stated Cheta Nwanze, accomplice on the Lagos-based SBM Intelligence firm.

“However there’s no firm on earth that’s populist for no purpose,” he stated of Dangote’s “reduction” pricing. “There’s all the time a motive in what they do. Are we going to see him elevate costs when he has conquered the market? We noticed it with cement and sugar [where he dominates]. Keep in mind, Nigeria has one of many highest cement costs on this planet. In the long term, for there to be competitors, the NNPC must get used to competing with Dangote when it comes to refining regionally.” (Aanu Adeoye)

Energy Factors

Vitality Supply is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with help from the FT’s international crew of reporters. Attain us at energy.source@ft.com and comply with us on X at @FTEnergy. Compensate for previous editions of the publication here.