PMS Price War: Dangote Refinery vs. NNPCL— Real Relief for Nigerians or Just a Market Mirage

PMS Price War: Dangote Refinery vs. NNPCL— Real Relief for Nigerians or Just a Market Mirage

The Nigerian petroleum sector has experienced significant fluctuations in Premium Motor Spirit (PMS) prices, particularly surrounding the operational commencement of the Dangote Refinery in September 2024.

This period has been marked by debates over pricing strategies, the impact of subsidy removals, and the broader implications for Nigerian consumers.

PMS Pricing Before the 2024 Fuel Scarcity

Before the fuel scarcity of 2024, Nigerians enjoyed relatively stable PMS prices, largely due to government subsidies. In the first quarter of 2023, the pump price of petrol was approximately ₦185 per litre. This subsidized rate was maintained to cushion consumers from the actual market costs of fuel importation.

Impact of Fuel Subsidy Removal in 2023

The landscape shifted dramatically when President Bola Tinubu announced the removal of fuel subsidies in his inaugural address on May 29, 2023, declaring, “Fuel subsidy is gone.” This policy change led to an immediate surge in petrol prices, with rates escalating to between ₦500 and ₦600 per litre. The subsidy removal aimed to alleviate the financial burden on the government but resulted in increased living costs for Nigerians.

PMS Price Trends Leading Up to Dangote Refinery’s Operations

In the months preceding the Dangote Refinery’s distribution kickoff in September 2024, PMS prices experienced unprecedented hikes. Reports indicate that Nigerians were purchasing petrol at prices ranging from ₦1,150 to ₦1,200 per litre, depending on the region and fuel station. This surge was attributed to factors such as the depreciation of the naira and rising international crude oil prices.

Allegations of Strategic Price Hikes

The timing of these price increases led to speculations that the Nigerian National Petroleum Company Limited (NNPCL) might have strategically raised PMS prices to create a more favourable market environment for the Dangote Refinery’s entry. While NNPCL cited external factors for the hikes, the concurrent escalation in prices just months before the refinery’s operations fueled public suspicion.

The Onset of the ‘PMS Price War’

The Dangote Refinery’s commencement of fuel distribution in September 2024 introduced a new dynamic to the market. Initially, Dangote’s petrol was priced competitively at ₦880 per litre, prompting NNPCL to adjust its prices to remain competitive. This development sparked a ‘PMS price war’ between the two entities, offering consumers alternative purchasing options.

Market Reactions and Future Outlook

Industry stakeholders have observed that this competition could lead to further reductions in PMS prices, benefiting consumers. The deregulation of the downstream oil sector is expected to attract more investors, potentially enhancing supply and stabilizing prices. However, the full realization of these benefits hinges on factors such as the naira’s stability, global oil prices, and the operational efficiency of local refineries.

Conclusion

While the recent reductions in PMS prices offer a semblance of relief to Nigerians, it is essential to recognize that sustainable price stability will likely emerge from genuine market competition and increased local refining capacity. The entry of the Dangote Refinery marks a pivotal step toward reducing import dependency, but the establishment of additional functional refineries and surplus refined PMS for export will be crucial. Such developments would compel major players like Dangote and NNPCL to enhance their marketing strategies to secure consumer patronage, ultimately fostering a more competitive and consumer-friendly market.