Africa’s largest oil producer, Nigeria, continues to battle with a painful irony as it remains crippled by fuel scarcity and soaring petrol prices, despite being a nation rich in crude oil. This contradiction has become a major part of the country’s economic reality, placing huge pressure on citizens while raising urgent questions about governance, policy direction, and long-term sustainability.
Since the removal of fuel subsidy in May 2023 under President Bola Tinubu, petrol prices have surged intensely. What was once sold for about ₦87 per litre now sells for over ₦1,000 in many parts of the country, depending on location and market forces. While the government defended the move as necessary to limit corruption, reduce financial pressure, and redirect funds to critical sectors like infrastructure, education, and healthcare, the reality of living for Nigerians has been harsh.
Transportation costs have doubled, sometimes tripled, eating into the purchasing power of millions who depend on daily income. The effects are visible everywhere, from rising food prices to increased operational costs for businesses. Inflation has continued its upward climb, with data from the National Bureau of Statistics (NBS), showing persistent increases, especially in food inflation.
At the heart of the crisis, there is a deeper structural issue, which is Nigeria’s dependence on imported fuel and the instability of the exchange rate. With petroleum products largely priced in dollars, the weakening of the naira continues to push fuel prices upward. This makes the exchange rate the true foundation of Nigeria’s fuel crisis. As long as the Naira remains weak, fuel prices will remain high.
In response to this challenge, the Federal Government introduced the Naira-for-crude policy in late 2024, with the aim of reducing pressure on foreign exchange reserves, stabilize the naira-dollar exchange rate, ensure domestic supply security, and encourage local refining capacity, with Afreximbank supporting the settlement process.
The Tinubu administration directed that crude oil be sold to local refiners in Naira rather than dollars. On paper, this policy aims to reduce pressure on foreign exchange and lower production costs locally.
However, its broader implications, especially as Nigeria remains a member of the Organization of the Petroleum Exporting Countries (OPEC), must be carefully examined. OPEC’s quota system and global pricing mechanisms are largely dollar-driven, meaning any deviation requires careful balancing to avoid market distortions or strained diplomatic relations.
The role of the Nigerian National Petroleum Company Limited (NNPCL), also remains vital, because as the dominant importer of petrol; NNPC’s pricing structure continues to raise concerns. Questions have emerged over disparities in pump prices, with reports of NNPC retail outlets selling at around ₦1,255 per litre, while independent marketers, including outlets like BOVAS, sell a little lower. These inconsistencies point to deeper inadequacies in supply chain management and pricing transparency.
The entry of the Dangote Refinery brought renewed hope. With a refining capacity of 650,000 barrels per day, it was expected to significantly reduce import dependence, but the situation has proven to be more complex. The refinery has not focused solely on supplying the Nigerian market, as it also exports refined products due to global market realities and profit considerations.
Compounding this is the unresolved issue of crude supply. The NNPC seems to be having difficulties fulfilling the quota it pledged to supply the Dangote Refinery, with several reports indicating that this commitment has not been met to date. Without consistent crude supply, local refining cannot reach its full potential.
Questions have also been raised about taxation and incentives. While Dangote Refinery operates within Nigeria’s tax framework, it benefits from certain fiscal incentives typical of large-scale industrial investments. This has sparked debate about whether such benefits are translating into meaningful relief for Nigerians at the pump.
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Outside Dangote, Nigeria’s modular refineries present another opportunity. Though they are smaller in measure, these refineries can contribute to distributed production and reduce logistical blockages.
While the five operating modular refineries face operational challenges, analysts consider their numbers grossly inadequate to address Nigeria’s fuel needs. Other factors including inadequate crude supply, financing limitations, and regulatory hurdles, also restrict how much influence modular refineries have on Nigeria’s fuel supply; strengthening this segment of the downstream sector can play a key role in stabilizing supply, and lowering cost.
The fuel crisis is not only economic but also deeply social as small businesses, barbers, tailors, food vendors, are struggling to survive due to rise in energy costs. Many have shut down, while households wrestle with the rising cost of fueling generators in a country where electricity supply remains unreliable. The crisis is widening inequality and deepening hardship.
Monetary policy also plays a significant role. The Central Bank of Nigeria (CBN), has repeatedly adjusted the Monetary Policy Rate (MPR) in a bid to control inflation and stabilize the Naira. Although higher interest rates can help limit inflation and support the currency, they also increase borrowing costs, potentially increasing operational costs for most downstream sector players. This delicate balance highlights the blow-back effects of monetary policy on the life of the average citizen.
In the end, Nigeria’s fuel challenges reflect years of structural neglect, policy inconsistency, and over-reliance on imports. The current situation is not just a market outcome but the result of long-standing systemic failures.
To move toward meaningful relief, it is important to that the Naira be strengthened, especially through export stimulation, to improve foreign exchange inflows and maintain disciplined monetary policies which includes strategic adjustments to the Monetary Policy Rate.
Consistent and sufficient fuel supply must be ensured, as scarcity naturally drives price increases, but when there is massive availability of fuel, the hike in prices come down.
The Naira-for-crude policy should also be fully implemented with transparency, to ensure that it benefits local refining without breaching international requirements. There is also the need to honour crude supply agreements to local refineries, especially the Dangote refinery and other modular operators, as well as expanding and supporting modular refineries to boost domestic production capacity.
Uninformed price differences need to be eliminated, and that can only be achievable if pricing transparency improves across NNPC and independent marketers.
Nigeria needs to encourage competition by enabling more private sector participation in fuel importation and distribution. Investing aggressively in alternative energy and public transportation can also help to reduce dependence on petrol.
The fuel crisis is not just an economic issue but it is also a test of leadership and national direction. The decisions made today will determine whether Nigeria can finally break free from this cycle of scarcity or continue to burden its citizens with the cost of a resource that should have been a blessing.
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