The price war in Nigeria’s fuel sector is harming consumers and weakening public trust in the government, despite offering some benefits to the wider economy. This article highlights the need for reforms prioritizing price stability and equity for Nigerians. Failing to address the imbalances caused by the price war could undermine the country’s efforts to achieve economic liberalization and leave many people feeling let down and left behind.
The ongoing fuel price war between the Dangote refinery and the Nigerian National Petroleum Corporation (NNPC) is reshaping Nigeria’s energy market. On one hand, the price war offers a glimpse into how healthy competition could improve the accessibility and affordability of fuel for Nigerian citizens. On the other hand, it also raises urgent questions about market volatility, inequality, and the role of deregulation.
Recent statistics as of August 12, 2025, show that the Dangote refinery has decreased its price per liter from 850 to 820 naira (a fall of around $0.02). Consequently, the depot operators in Lagos, including Bovas, Emadeb, and Pinnacle, have declared a new counter price, cutting rates from 850 to 822 naira (marginally above the Dangote refinery). At the same time, the NNPC has reduced its retail price to 890 naira per liter (down from 945). So, with prices falling, why are Nigerians worried?
Although overall, competition is beneficial for the economy, many Nigerian people believe that a price war mostly serve the self-interests of the two main entities. This negative public perception is perhaps a product of frustrations at the government’s inability to successfully deliver on its policy objectives. The government may have had good intentions in removing the subsidy, but by failing to establish appropriate measures and execute the policy in a timely manner, it has eroded public trust.
What is going on with Nigeria’s fuel market?
Fuel demand in Nigeria grew substantially towards the end of the 20th century. Motor spirit consumption increased from 2.3 million metric tons (MMT) in 1979 to 4.4 MMT in 1989—an average annual increase of 7.5%. Fast-forward to 2025, and the country finds itself at a critical juncture, with fuel imports having plunged by 67% since mid-2024.
This mismatch is not due to a failure in demand alone, but rather because of a shift in domestic refining capacity and the fierce fuel price war. For example, the Warri refinery commenced operations in 2024, with the Port Harcourt and Kaduna refineries also starting up around this time. This increase in domestic production began in 2023 with the inauguration of the Dangote refinery, which is now projected to reach a capacity of 650,000 barrels per day by 2025 – enough to satisfy 60% of national fuel demand. But while the development of these facilities has enhanced Nigeria’s domestic processing potential, it has also facilitated aggressive price cutting by different stakeholders aiming to win market control.
For 236 million Nigerians, at first price reductions may seem like a welcome relief, significantly decreasing transportation and food costs. And yet, if the undercutting becomes unsustainable, it could trigger sudden price hikes. This would have a strong negative impact on lower-income households, who spend a disproportionate share of their income on food and energy.
As a result, the government needs to apply a regulatory framework that ensures healthy price competition. A ‘healthy’ system is one that protects the average Nigerian from ‘spending today’s savings on tomorrow’s crisis’. There are plenty of examples of effective policies from around the world, such as the US government’s Sherman Antitrust Act (1890), which helps prevent dominant firms from setting unsustainably low prices to drive out competitors. A similarly robust antitrust regime in Nigeria could safeguard healthy competition and strengthen public trust in the policy program.
Subsidy without protection: where is the safety net?
On his inauguration day in May 2023, President Tinubu proclaimed that the “fuel subsidy is gone”. The president’s declaration was intended to put a permanent end to Nigeria’s long-standing fuel subsidy program. At the time, economists and international observers praised the policy as a crucial instrument for managing fiscal sustainability.
However, while the administration regarded the president’s statement as a demonstration of political will, the situation that developed was less favorable. The market reacted to the announcement sharply, with gas prices in Nigeria almost tripling, leading to panic buying. Indeed, since the removal of the subsidy two years ago, petrol prices in certain regions have risen by 450%.
At the time of the reform, critics warned that the abolishment of the subsidy could result in economic fragility if there was no accompanying standard protection in place. International outlets such as the Financial Times and local economists like Bismarck Rewane argued that the policy changes did not provide enough support for the Nigerian people. This viewpoint is consistent with research by the World Bank, which shows that approximately 4 million additional Nigerians were in poverty during 2023, compared with the pre-reform era.
What is the way forward?
This ongoing episode serves as a lesson for Nigerian policymakers. Numerous countries worldwide have successfully navigated the challenges posed by petroleum sector liberalization. For example, India’s removal of fuel subsidies was accompanied by a direct benefit transfer, which ensured that vulnerable households received targeted support. Similarly, Indonesia’s subsidy policy changes in 2005 and 2014 were successful in part because savings were allocated to health insurance and village infrastructure.
The government should draw on this external evidence to ensure the long-term viability of its gasoline market. On the ground, Nigerian citizens recognize a policy only to the extent that they can experience it immediately. As much as subsidy withdrawal and price wars can be beneficial to the national economy, policymakers must also guarantee that the public trusts the government and its institutions by ensuring people feel the gains of the policy change. The goal here is not only cheaper fuel, but also a more equitable energy system that promotes inclusive development and poverty reduction, guaranteeing that policies are implemented without leaving the most vulnerable people behind. Decision makers—in Nigeria and elsewhere—must urgently review, reform, and re-deliver policies that currently harm those most in need. Making fuel prices fair is a good place to start.
