Prof. Wumi Iledare Says the Real Issue Is Not the Currency But Whether Competition Can Keep the Market Honest
By William Emmanuel Ukpoju
Ngeria’s downstream petroleum sector has once again found itself at the centre of national economic debate. Within weeks of announcing plans to sell refined petroleum products in United States dollars, Dangote Petroleum Refinery reversed course, resuming the sale of Premium Motor Spirit (PMS) in naira at N1,215 per litre. The reversal eased fears of imminent fuel shortages and offered temporary relief to petroleum marketers and consumers already burdened by high fuel costs and inflation.
The refinery explained that its earlier proposal to adopt dollar-denominated sales was driven by difficulties in sourcing sufficient crude oil under the Federal Government’s naira-for-crude initiative, a policy introduced in October 2024 to allow domestic refiners to purchase crude in naira rather than in foreign currency. While the decision to return to naira transactions has calmed the market for now, it has also reignited a broader conversation about the sustainability of Nigeria’s deregulated petroleum market, the effectiveness of government policies, and the country’s continued vulnerability to foreign exchange volatility.
For petroleum economist Professor Wumi Iledare, the entire episode offers an important lesson. The debate, he argues, should not be reduced to whether Dangote sells fuel in dollars or naira. Rather, it should focus on what the brief policy shift reveals about the realities of market deregulation, foreign exchange exposure, crude supply constraints, and the need for a truly competitive downstream petroleum sector.
A Temporary Reversal, Not the End of the Debate
Dangote Refinery’s decision to resume naira sales may have eased immediate concerns, but it does not eliminate the structural issues that prompted the refinery’s earlier announcement.
According to the company, its proposed shift to dollar-denominated pricing stemmed from persistent challenges in accessing enough domestically supplied crude under the government’s naira-for-crude arrangement. The refinery increasingly found itself relying on imported crude purchased in dollars, creating a mismatch between its operating costs and its revenue if products continued to be sold exclusively in naira.
Although the return to naira sales signals that government and industry stakeholders have found at least a temporary solution, analysts believe the underlying challenges remain unresolved.
For Prof. Iledare, the episode demonstrates that deregulation is working as intended. A market participant responded to changing commercial realities, while subsequent adjustments reflected evolving market and policy conditions rather than government-imposed price controls.
A Commercial Decision, Not Price Fixing
Prof. Iledare remains emphatic that Dangote Refinery has never “fixed” petroleum prices. In petroleum economics, he explains, there is an important distinction between announcing a selling price and fixing market prices.
Every producer in a competitive market has the right to determine the price at which it is willing to sell its products. Dangote’s announcement of its ex-depot prices, whether in dollars or naira, represented exactly that.
Whether those prices become the market benchmark depends on entirely different factors: the availability of alternative suppliers, buyers’ willingness to purchase at those prices, import parity, logistics costs, and the overall competitiveness of the downstream market.
Price fixing, Prof. Iledare notes, occurs when competitors collude to manipulate prices or eliminate competition. A refinery independently publishing the price of its own products does not constitute anti-competitive conduct.
“The relevant policy question,” he argues, “is whether Nigeria’s downstream market is sufficiently competitive to discipline those prices.” That observation shifts attention away from Dangote’s pricing decisions and toward the overall structure of Nigeria’s petroleum market.
Why the Dollar Was Considered
Many Nigerians questioned why a refinery operating on Nigerian soil would contemplate selling its products in a foreign currency. Prof. Iledare says the answer lies in the economics of modern refinery operations.
Although the refinery is located in Nigeria, many of its major cost components remain denominated in US dollars.
Crude oil purchases, imported catalysts, specialised equipment, spare parts, debt servicing, marine insurance, financing costs, and technical services are all tied to international markets.
If these costs are incurred in dollars while products are sold only in naira, the refinery assumes substantial exchange-rate risk.
Every depreciation of the naira between crude procurement and product sales erodes profitability and weakens the refinery’s ability to replace inventory.
“This is what petroleum economists describe as currency mismatch,” Prof. Iledare explains.
Aligning revenues with dollar-denominated obligations is therefore a standard commercial risk-management strategy rather than an attempt to circumvent deregulation.
Equally important, he notes, dollar-denominated pricing does not necessarily imply physical payment in dollars. The dollar simply serves as a pricing benchmark, with actual payments often made in naira using prevailing exchange rates.
The Naira-for-Crude Programme Under the Spotlight
The controversy has also placed renewed attention on the Federal Government’s naira-for-crude programme.
Launched in October 2024, the initiative was designed to allow domestic refiners, including Dangote Refinery, to purchase Nigerian crude oil in naira rather than dollars. The objective was clear: reduce pressure on Nigeria’s foreign exchange reserves, stabilise the naira, support local refining, and ultimately lower domestic fuel prices.
Dangote’s earlier decision to contemplate dollar sales suggested that the programme was experiencing implementation challenges, particularly regarding the consistent availability of crude.
The refinery’s subsequent return to naira pricing may indicate renewed confidence in the arrangement, but it also underscores the need for the government to ensure reliable crude supply if the policy is to achieve its long-term objectives.
Without dependable access to locally supplied crude, refiners may once again face the same foreign exchange pressures that triggered the initial announcement.
Domestic Refining Is Not Complete Insulation
The Dangote Refinery has dramatically reduced Nigeria’s dependence on imported petroleum products and strengthened national energy security.
However, Prof. Iledare cautions against assuming that local refining automatically shields the country from global economic forces. Petroleum remains an internationally traded commodity. Crude oil prices are determined globally. Equipment, financing, technology, catalysts, and maintenance services remain linked to international markets.
Consequently, domestic refining reduces import dependence but does not eliminate exposure to international crude prices or exchange-rate fluctuations.
This explains why fuel prices may continue to respond to movements in global oil markets and foreign exchange rates even when refined domestically.
What Deregulation Really Means
The recent developments also provide an opportunity to clarify what deregulation under the Petroleum Industry Act actually means. According to Prof. Iledare, many Nigerians mistakenly interpret deregulation as the complete withdrawal of government from the petroleum market. That is not the intention of the law. Deregulation simply replaces government-administered fuel pricing with market-based price discovery.
Prices are determined by market forces rather than by administrative directives or subsidies. The government’s responsibility shifts from fixing prices to ensuring that the market operates transparently, competitively, and efficiently.
In this framework, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) does not determine fuel prices. Instead, it ensures product availability, market transparency, consumer protection, and fair competition.
Competition Remains the Ultimate Safeguard
Prof. Iledare acknowledges Dangote Refinery’s enormous contribution to Nigeria’s energy security, foreign exchange savings, industrialisation, and employment.
Nevertheless, he cautions that every successful market leader eventually raises questions about market concentration.
There is an important distinction between market leadership, market dominance, and abuse of market power.
A company may become the industry’s largest supplier simply because it is efficient, technologically advanced, and financially strong. That, by itself, is not a problem. The concern arises only if competition becomes so weak that consumers have few alternatives or if market power is exercised in ways that distort prices or exclude competitors.
Should such circumstances emerge, Prof. Iledare believes the responsibility rests with independent institutions such as the NMDPRA and the Federal Competition and Consumer Protection Commission (FCCPC) to ensure that commercial freedom is balanced with effective competition oversight.
Governance Will Determine Success
Beyond Dangote’s pricing decisions lies a much broader national challenge. No petroleum market can function efficiently without macroeconomic stability. Exchange-rate volatility, inflation, inconsistent policies, foreign exchange shortages, and regulatory uncertainty all weaken the effectiveness of market liberalisation.
Sustainable petroleum pricing therefore depends not only on refining capacity but also on sound monetary policy, reliable crude supply arrangements, transparent regulation, and credible institutions.
As Prof. Iledare puts it, the Petroleum Industry Act was never designed merely to change who announces fuel prices. Its objective was to replace administrative pricing with competitive market-based price discovery.
That ambition will ultimately be judged not by whether Dangote prices fuel in dollars or naira, but by whether Nigeria succeeds in building a downstream petroleum market that is genuinely competitive, transparent, resilient, and attractive to investment.
His concluding message remains particularly relevant. “The quality of governance”, he consistently emphasises through the Petroleum Economics and Welfare Initiative (PEWI), “will determine whether market liberalisation delivers efficiency, effectiveness, equity, and ethical outcomes.”
Dangote’s decision to reverse its dollar-pricing plan may have brought temporary relief to consumers, but it has also exposed the deeper structural challenges facing Nigeria’s petroleum sector. Until issues surrounding crude supply, foreign exchange stability, and effective competition are fully addressed, debates over fuel pricing are likely to remain a defining feature of the country’s evolving deregulated energy market.