Price War Erupts in Nigeria’s Downstream Oil Sector as Dangote Refinery Disrupts Market
A significant price war has ignited in Nigeria’s downstream oil sector, driven by the aggressive pricing strategy of the Dangote Petroleum Refinery. As more MRS filling stations in Lagos and Ogun states begin dispensing Premium Motor Spirit (PMS), commonly known as petrol, at a competitive N739 per litre, motorists are actively boycotting retail outlets that continue to sell the product at higher prices. This shift in consumer behaviour has forced other fuel stations to slash their prices by approximately N100 per litre, a move that reportedly places them below their cost of purchase, signalling the intense nature of the ongoing competition.
The catalyst for this market disruption was the Dangote refinery’s recent decision to slash its gantry price of petrol by a substantial N129, bringing it down from N828 to N699 per litre. This move reportedly shocked depot owners and marketers across the industry. During a recent press briefing, Aliko Dangote, President of the Dangote Group, revealed he had received intelligence that some marketers intended to maintain inflated pump prices despite the reduction in the refinery’s ex-depot price.
In response, Dangote vowed to enforce the new pricing regime, with MRS stations commencing sales at N739 per litre. “I was told that the marketers have met with (some officials) and were told to make sure that the price is maintained high. But this price we are going to introduce, we are going to start with MRS stations, most likely on Tuesday (last week) in Lagos; that N970 per litre, you won’t see it again,” Dangote stated. He further elaborated on his commitment to driving down prices, inviting members of the Independent Petroleum Marketers Association of Nigeria (IPMAN) to purchase fuel at the reduced rate of N699 per litre, provided they could buy in bulk quantities of ten trucks.
“We are going to use whatever resources we have to make sure that we crash the price down. For this December and January, we don’t want people to sell petrol for more than N740 nationwide. Those who want to keep the price high to sabotage the government, we will fight as much as we can to make sure that these prices are down,” Dangote asserted, emphasizing his determination to combat price gouging.
Motorists Flock to Lower-Priced Outlets
The impact of the price reduction was immediately visible. When some MRS filling stations in Lagos began selling petrol at the new, lower price on Tuesday, long queues of vehicles formed, eager to take advantage of the savings. An MRS station in Alapere, Lagos, reportedly saw a significant surge in customers, many of whom explicitly chose to bypass neighbouring outlets selling petrol at prices exceeding N800 per litre.
This consumer behaviour has compelled other filling stations to re-evaluate their pricing strategies. By Sunday, checks revealed that many retail outlets, which had been selling petrol at over N900 per litre just the previous week, had begun reducing their prices to below N800 per litre to remain competitive. While stations offering cheaper fuel experienced a rush of customers, those maintaining higher prices struggled to attract buyers.
“The good thing is that there is always an MRS in almost every neighbourhood you turn to, and this has given buyers the opportunity to shun other stations to buy the cheaper Dangote petrol from MRS. This is a major concern for all traders nationwide,” commented a major oil marketer who wished to remain anonymous due to the sensitivity of the situation.
Price Adjustments Across the Board
As of Sunday, numerous filling stations had implemented price changes. For instance, the SGR filling station in Ogun was selling petrol at N750 per litre, and Petrocam in Mowe at N785 per litre. Both stations found it challenging to compete with the N739 per litre offered by an MRS station situated opposite the RCCG Camp Ground, a stark contrast to their previous prices, which hovered around N900 per litre.
However, not all stations had adjusted their prices significantly. Heyden, reportedly a partner of Dangote, was still selling petrol at N875 per litre, while AP was offering it at N800 per litre. Mobil filling stations along the Lagos-Ibadan Expressway were observed selling at N780 per litre, with Akiavic at N799, Habeeb at N850, Eternal at N880, and Asharami at N890 per litre. These prices, while still higher than the Dangote-affiliated stations, represent a considerable reduction of N100 or more compared to their previous price points.
Financial Strain on Marketers and the Refinery
The intense price competition is not without its financial repercussions. The Nigerian National Petroleum Company Limited (NNPC) also reduced its petrol prices, from N875 to a range of N825 to N840 per litre, depending on the location. As a major importer of petrol, the NNPC’s position is particularly challenging, especially when considering the landing cost of approximately N828 per litre, according to the Major Energies Marketers Association of Nigeria. This makes it difficult for importers, including the NNPC, to compete with Dangote’s ex-depot price of N699 per litre and pump price of N739 per litre, potentially forcing them to sell below their cost.
The era of the NNPC being the sole importer of petrol, largely due to subsidies, appears to be fading. With the Dangote refinery commencing petrol production, the sector has moved towards full deregulation, leading to the disappearance of the queues that once characterized NNPC stations due to price disparities. Many NNPC stations in Lagos are now reportedly struggling to attract customers, who are gravitating towards outlets offering more affordable fuel.
Marketers have voiced concerns about losing billions of naira in the process. The PUNCH reports suggest that petrol importers could face monthly losses amounting to as much as N102.48 billion due to the Dangote refinery’s price reduction. Simultaneously, the refinery itself is projected to incur losses of approximately N91 billion per month as a direct consequence of the price cut, underscoring the fierce competition reshaping Nigeria’s downstream oil market.
Chinedu Ukadike, spokesperson for IPMAN, stated earlier that “Marketers will lose over N80bn on this reduction. We will lose more than N80bn. And now that this reduction is there, you will see that the pump price will start dropping gradually from N900 towards N750 per litre,” anticipating a natural consumer shift towards cheaper fuel options. Ukadike has also urged the Dangote refinery to consider compensating marketers who acquired petrol at the previous, higher rates, suggesting discounts on future purchases as a means of mitigating their financial losses.
Aliko Dangote, however, maintains that the refinery is also experiencing significant financial strain due to its price reductions. He disclosed during a recent media briefing that the refinery lost an estimated N60 billion in November alone after a previous price cut of N49. “For the marketers, I pray, and I wish they would even lose more because I’m not printing money. I’m also losing money; it’s not that I’m making money,” Dangote stated. He further articulated his resolve, stating, “They want imports to continue. I don’t think it is right. They want to continue to dump imported petrol, so I must have a strategy of how to survive because $20bn of investment is too big to fail. We are in a situation where we will continue to play cat and mouse, and at the end of the day, somebody will give up. It is either we give up, or they will give up, and I don’t think I will give up.”
Price Dictates Patronage in a Deregulated Market
IPMAN spokesperson Ukadike reiterated the principle that price dictates patronage in the current market environment. “We are in a situation where competition can be determined by price. Patronage will be determined by pricing. Nobody is against you; nobody is regulating you. You will regulate yourself. The market will regulate itself. The time has gone when people were queuing at NNPC filling stations. Wherever the fuel is cheap, that is where the marketers go. So, we are in a price war. Demand and supply determine the price,” he explained.
Ukadike highlighted that with Dangote’s gantry price at N699, marketers are compelled to adopt competitive pricing to retain their customer base, otherwise, the interest on their capital from banks would become unsustainable. He announced that IPMAN has formed a partnership with the Dangote refinery, noting that Dangote has extended an invitation to IPMAN for the first time, suggesting that major marketers have not been as effective in evacuating products. “He has now realised that only the independent marketers are the strategic partners that can evacuate his petroleum products as quickly as possible,” Ukadike stated.
Ukadike expressed optimism that Dangote would reciprocate IPMAN members’ loyalty with compensation for losses incurred due to the price drop, citing Dangote’s marketing strategy as one that rewards patronage. He also mentioned that Dangote has made it easier for independent marketers by reducing the minimum purchase quantity to 250,000 litres, a significant factor given that independent marketers constitute over 85 per cent of filling stations in Nigeria. This allows IPMAN members to load petrol directly from the refinery on an individual basis.
Over 1,000 Trucks Daily at Dangote Refinery
The Dangote refinery confirmed a significant increase in loading activities, with over 1,000 fuel trucks reportedly visiting the facility daily to load PMS. A statement from the company indicated that the refinery has become a central hub for fuel distribution in Nigeria, attributing this to “bold strategic adjustments aimed at making energy more affordable and accessible.” These adjustments include the substantial reduction in gantry price and the lowering of the minimum purchase volume from two million litres to 250,000 litres. The statement emphasized that these measures demonstrate the refinery’s commitment to stabilizing supply, fostering inclusivity, and supporting national economic growth.
To further instill confidence among marketers, the refinery has introduced a 10-day bank guarantee system, ensuring a consistent supply and reinforcing trust in its operations. The company reported an “overwhelming” response from fuel marketers since the announcement, with over 1,000 trucks loading PMS daily, which it described as a “clear testament to market trust in the Dangote refinery’s efficiency and leadership in the downstream sector.”
Aliko Dangote was quoted as saying, “Our goal has always been to make energy affordable and accessible for every Nigerian. By reducing prices and lowering the minimum purchase volume, we are empowering both large and small marketers to participate in the market, ensuring fuel reaches every corner of the country.” This approach is designed to open the market to smaller operators, strengthen distribution networks, and improve fuel availability nationwide, ultimately driving competition and ensuring Nigerians benefit from a more stable and affordable fuel supply chain.
In a bid to further inform the public and prevent exploitation, the Dangote Group has issued warnings through social media, urging Nigerians to be vigilant against overcharging. A short video shared on their social media handles stated, “Petrol is now selling at N739.00 per litre at MRS filling stations nationwide. Avoid being overcharged by other stations! Say no to rip-offs. Get quality petrol at MRS stations nationwide. Many other stations are joining soon.”
