Since then, the price of petrol in Nigeria has fluctuated, as oil marketers across the country respond to the price shift initiated by fuel from the largest single-train oil refinery in the world.
The ex-depot price of premium motor spirit (PMS), was lowered to N899.50 per litre by the Dangote refinery during the yultide season last year, from N970 in November.
While fuel prices would jump back up in 2025, the Dangote refinery, two weeks ago announced a reduction of its selling price of petrol to retailers: from N950 per liter to N890 per liter, further easing market pressures.
This sort of decision driven by market forces, according to Dangote, is the reason why some have come to believe that Nigeria’s energy market may undergo substantial deflation, after experiencing its worst inflation spikes in recent years.
Prior to the inauguration of the country’s current president, petrol was sold for as low as N180 per liter.
However, after the president announced the removal of fuel subsidies, the price of petrol shot up drastically, even reaching as high as N1,200 per liter at one point.
The presence of a domestic refinery as opposed to the insistent reliance on imported petrol, is the reason why some experts believe that fuel prices could drop to levels that would significantly reduce the country’s inflation levels.
Following the announcement of fuel subsidy removal and the floating of the Nigerian currency, inflation levels in the country, which were already high, have gone from 22.22% to 34.80%.
Despite this, projections show that fuel prices, and by extension, inflation levels in the country are set to go down, and the Organization of the Petroleum Exporting Countries (OPEC), seems to share the same estimates.
A recent report by the organization revealed that the Dangote refinery would ensure an adequate supply of fuel as well as spur a reduction in prices.
What OPEC said
“After the Nigerian economy recorded healthy growth in 3Q24 across key sectors, economic growth is anticipated to have been steady in 4Q24 as well. Economic growth reached 3.5%, y-o-y, in 3Q24, up from 3.2%, y-o-y, in 2Q24.
This came despite the impact of tightening monetary policy, with the non-oil sector playing an increasingly important role in driving growth, supported by easing price pressures and a potential loosening of tight monetary policy,” the report states.
“However, the oil sector remains central to the economy, and the Dangote Refinery reaching full production capacity should help stabilize the petroleum product supply and possibly lower petrol prices,” it adds.
As per the report, the ease of inflation projected to happen could also result from a more stable currency performance.
“While inflation remains high, early signs of cooling have emerged, partly due to base effects from the naira’s devaluation. The central bank appears to be nearing the end of its tightening cycle, following its rate hikes in 2H24, with the key policy rate standing at 27.5%,” the report revealed.
“Consequently, real interest rates remain deeply negative. Inflation rose to 34.9%, y-o-y, in December, following 34.6%, y-o-y, in November and 33.9%, y-o-y, in October. The S&P PMI remained at an expansionary level of 52 in January, compared with 52.7 in December,” it added.
Increased production capacity for the Dangote refinery
Officials at the Dangote refinery in January revealed that the facility’s present capacity which is 500,000 barrels per day, is on track to reach its full potential at 650,000 barrels per day by June of this year.
This was announced as a result of the belief that a significant obstacle preventing the refinery from reaching its initial 650,000 bpd capacity is about to be removed.
Because the supply it now receives from Nigeria is inadequate, the refinery said that it intends to buy crude from outside the country’s oil market.
If the refinery covers its local crude shortfall with imported oil, it is expected to increase production to 650,000bpd.
The Nigerian National Petroleum Cooperation (NNPC) now supplies between 350,000 and 450,000 barrels per day of oil to the Dangote refinery.
