Market battles at the gantry: How competition, not refining cost, sets petrol prices (1)

In Nigeria, petrol pricing now reflects competition, market structure and global market forces, rather than production capacity alone, according to an investigation. The investigation reveals a complex web of factors that drive petrol prices, including international crude oil movements, exchange rate fluctuations and import parity.

The Dangote Petroleum Refinery, costing approximately $20 billion, was built to process 650,000 barrels of crude per day and has since expanded to about 700,000 barrels daily, with plans to reach 1.4 million barrels per day in three years. Despite the refinery's expansion, petrol prices have not decreased as expected. The downstream sector is still influenced by importers, depot owners and marketers operating under a system driven by international crude prices, exchange-rate movements and long-standing subsidy distortions.

Dangote Refinery's founder, Aliko Dangote, acknowledged the challenges of entering the market, stating that entrenched interests resisted the emergence of domestic refining. He accused international traders and local marketers of sustaining fuel imports to frustrate domestic refining. However, data analysis shows that Dangote's gantry price, the price at filling stations, is often higher than imported petrol prices, with Dangote's price exceeding imported petrol in 52.57 per cent of the observed instances and imported petrol being cheaper in 47.43 per cent.

This indicates a market where pricing leadership fluctuates depending on changing conditions, challenging the notion that local refining would automatically make fuel cheaper and more readily available.