By Churchill Oyowe
For millions of Nigerians, every announcement of an increase in the pump price of Premium Motor Spirit (PMS), popularly known as petrol, has become a familiar and painful ritual. Almost overnight, transport fares rise, food prices soar, production costs increase, and inflation tightens its grip on households already struggling under severe economic hardship.
What has become increasingly difficult to understand, however, is why pump prices rise almost immediately whenever international crude oil prices increase, yet fail to fall proportionately whenever global oil prices decline.
This is where many Nigerians believe the system becomes fundamentally unfair. A comparison between the recent downward adjustments in petrol prices and the decline in global crude oil prices raises serious concerns.
Before the U.S.-Iran conflict and the Strait of Hormuz crisis, Brent crude traded at about US$73 to US$75 per barrel, while petrol sold for about N800 per litre in Nigeria. The conflict pushed crude prices to well above US$100 per barrel, leading marketers across the country to raise pump prices to between N1,350 and N1,700 per litre, depending on location and individual pricing decisions.
Now that global crude prices have fallen back to around US$75 per barrel—almost the same level as before the crisis—one would ordinarily expect petrol prices to return to somewhere between N800 and N900 per litre. That, however, has not happened.
This apparent imbalance raises serious questions about the transparency of Nigeria’s downstream petroleum market and whether the country’s deregulation policy is operating in the interest of consumers or simply guaranteeing profits for marketers at the expense of ordinary Nigerians.
A simple economic comparison exposes the inconsistency.
When petrol sold for about N800 per litre, Brent crude traded at roughly US$73 per barrel. If crude oil later rose to around US$100 per barrel, the increase amounted to approximately 37 percent.
However, crude oil is only one component of the final retail price of petrol. International energy pricing models indicate that crude typically accounts for between 45 and 60 percent of the pump price. The remaining costs include refining, freight, insurance, storage, transportation, taxes, levies and marketers’ margins.
Assuming these other cost components have remained relatively stable, as appears to be the case given that exchange rates, shipping costs and taxes have not changed significantly, a 37 percent increase in crude prices should translate to a pump price of approximately N950 to N1,000 per litre, not substantially beyond that range.
If retail prices exceed what the cost structure reasonably suggests, Nigerians deserve a clear explanation. Unfortunately, consumers are rarely provided with a transparent breakdown showing exactly how pump prices are determined. Instead, pricing decisions often appear opaque, leaving the public with the impression that increases are implemented immediately while reductions are delayed or significantly diluted.
This phenomenon, often described by economists as “sticky pricing,” benefits sellers far more than consumers.
Marketers readily cite rising international prices as justification for increasing pump prices, yet when crude prices decline, reductions either come very slowly or are too insignificant to reflect prevailing market realities, as many observers argue was the case with the recent downward adjustments by Dangote Refinery and the NNPCL.
The result is that Nigerians appear to bear virtually all the downside risks of deregulation while enjoying very few of its supposed benefits.
In a genuinely competitive market, the opposite should occur. Higher costs should indeed translate into higher prices, but falling costs should equally result in prompt and commensurate reductions. Anything short of this undermines public confidence in the market and fuels suspicion that pricing decisions are influenced more by profit considerations than by objective economic realities.
This is where regulators have a critical responsibility.
The role of regulation is not to fix prices arbitrarily but to ensure transparency, fairness and healthy competition.
Regulators should require the periodic publication of a comprehensive pricing template indicating the contribution of crude oil prices, exchange rates, freight charges, insurance costs, taxes, levies, depot charges and marketers’ margins to the final pump price.
Such transparency would enable Nigerians to independently determine whether price adjustments are justified.
Equally important is the need for effective competition. Where competition is weak, dominant marketers can maintain artificially high prices even when market conditions favour reductions. Strong regulatory oversight is therefore essential to prevent excessive margins and ensure that consumers benefit from declining input costs.
Nigeria also stands to gain immensely from strengthening domestic refining capacity. Increased local refining should reduce dependence on imported petroleum products, lower freight and insurance costs, conserve foreign exchange and provide greater stability in domestic fuel pricing.
Beyond the petroleum sector, fair fuel pricing has implications for the entire economy. Petrol remains a major input in transportation, agriculture, manufacturing and commerce. Every unjustified increase triggers multiple rounds of inflation that ultimately erode purchasing power, discourage investment and deepen poverty.
Deregulation should never become a one-way mechanism in which marketers enjoy guaranteed profits while consumers absorb every economic shock.
The principle should be simple and non-negotiable: when legitimate costs rise, prices may rise. When legitimate costs fall, prices must also fall.
Anything less is not an efficient market; it is an imbalance that places the burden of market adjustment almost entirely on Nigerian consumers.
The time has come for greater transparency, stronger regulatory oversight and genuine competition in the downstream petroleum sector. Nigerians deserve a pricing system that reflects economic reality rather than one that appears to reward opacity.
Only then can deregulation achieve its intended objective of promoting efficiency while protecting the public interest.
Comrade Churchill Oyowe, Chairman, Nigeria Union of Journalists (NUJ), writes from Asaba.
