How local refining is cutting prices, easing inflation, and reshaping the downstream sector
By William Emmanuel Ukpoju
For decades, Nigeria’s petrol pricing has been dictated by forces far beyond its borders: foreign exchange swings, shipping costs, and the fragile economics of fuel importation. The more than 28 per cent decline in petrol prices since September 2024 suggests that this long-standing model may finally be weakening. At the centre of this shift is the $20 billion Dangote Petroleum Refinery, whose growing output is beginning to reshape pricing dynamics, inflation trends, and public sentiment across the country.
When Dangote-produced Premium Motor Spirit (PMS) entered the market in September 2024, petrol sold for about N1,030 per litre. By December 2025, prices had fallen to roughly N739 per litre. While still high by historical standards, the drop represents a rare reversal in a market accustomed to steady increases.
What experts say: structural change, not coincidence
Energy economists argue that the price decline is not accidental. According to Lagos-based energy analyst Ayo Teriba, local refining has introduced a new cost anchor into the downstream sector.
“For the first time in years, petrol pricing is being influenced by domestic production economics rather than import parity alone. That changes everything,” Teriba said. “The Dangote Refinery has reduced exposure to forex volatility, which is a major driver of pump price inflation.”
Similarly, Dolapo Oni, Head of Energy Research at Ecobank Nigeria, notes that while inflation has multiple drivers, a cheaper and more predictable fuel supply has a knock-on effect across the economy.
“Transport costs feed directly into food inflation and services. When fuel prices stabilise, the ripple effects are felt almost immediately,” she explained. “What we are seeing now is the early dividend of domestic refining.”
Inflation, transport and household relief
The National Bureau of Statistics reported headline inflation of 14.45 per cent in November 2025, down from 16.05 per cent in October. For ordinary Nigerians, the numbers translate into daily realities: cheaper transport fares, reduced logistics costs, and some breathing space for small businesses.
In Abuja, commercial bus driver Sadiq Musa says the price drop has eased pressure on operators and commuters alike.
“Before, anytime fuel went up, passengers would fight us when we increased fares,” he said. “Now fuel is coming down small-small, and transport is calmer. At least we can plan.”
For Grace Okafor, a foodstuff trader in Onitsha, the impact is indirect but significant.
“When transport is expensive, it affects everything: rice, beans, tomatoes,” she said. “Fuel coming down is helping traders reduce losses, even if prices are still high.”
Supply security and festive season confidence
Beyond pricing, supply consistency remains a critical issue. Dangote Petroleum’s plan to release 1.5 billion litres of petrol in December 2025 and another 1.5 billion litres in January 2026, around 50 million litres daily, has reassured both marketers and consumers during a traditionally volatile period.
Former NNPC downstream executive, Henry Adigun, believes this approach represents a cultural shift in supply management.
“Historically, festive periods were associated with panic buying and scarcity because imports could not respond quickly,” he said. “With local refining, supply can be adjusted in real time. That is a game-changer.”
Daily output is expected to rise to 60 million litres by February 2026, up from the current 40–45 million litres, further strengthening market confidence.
Capacity expansion and market recalibration
Commissioned in 2023 at 350,000 barrels per day, the Dangote Refinery is progressing toward its full design capacity of 650,000 barrels per day. Diesel and aviation fuel production had already entered the market earlier, significantly cutting import volumes and easing pressure on Nigeria’s foreign exchange reserves.
According to Timipre Omorogbe, former Executive Director at the Nigerian National Petroleum Corporation, the refinery’s broader value lies in market discipline.
“When local supply becomes dominant, it forces efficiency across the value chain, from logistics to pricing transparency,” he said. “Import-based arbitrage gradually loses its appeal.”
Public expectations and lingering concerns
Despite the optimism, ordinary Nigerians remain cautiously hopeful. Many note that while prices have fallen, fuel still consumes a large share of household income.
“We are happy fuel is not going up every month again,” said Abdulrahman Bello, a tailor in Kaduna. “But N739 is still expensive. We hope it can come down more.”
Experts echo this caution, warning that logistics bottlenecks, distribution margins, and regulatory inconsistencies could dilute the gains if not addressed.
A fragile but meaningful shift
The 28 per cent drop in petrol prices marks more than a temporary correction; it signals a gradual recalibration of Nigeria’s downstream petroleum sector in a post-subsidy era. While the Dangote Refinery alone cannot solve all structural challenges, its growing output has altered the conversation from scarcity management to supply stability.
If capacity expansion continues and supporting policies align, the refinery could anchor a more predictable pricing regime, one that reduces inflationary shocks and restores public confidence in Nigeria’s energy system. For millions of Nigerians, the real test will be whether this early relief evolves into lasting affordability.
