Nigeria's Petrol Price Puzzle: Rising Prices Despite Falling Crude Oil Costs

Nigeria's petrol market has seen an unusual trend where petrol prices are rising despite falling crude oil prices. MRS, a major fuel marketer, increased its petrol price in Lagos from ₦1,205 to about ₦1,310 per litre, a rise of roughly 9%. Other fuel marketers have also raised their prices, with some reaching up to ₦1,400 per litre.

The increase in petrol prices is puzzling given that Brent crude oil was trading around $88 a barrel in August. However, the price of petrol is determined by more than just the international price of crude. The economics of crude acquisition, refining, depot supply, transportation, storage, and competition between fuel suppliers are becoming increasingly important as Nigeria's domestic refining industry expands.

The growth of domestic refining has changed the dynamics of Nigeria's petroleum trade. With Dangote Refinery becoming an increasingly important supplier of refined petroleum products, the country can now obtain petrol from domestic refineries rather than relying heavily on imported refined petroleum products. This shift in supply structure means that the price story is no longer solely about how much crude oil costs on the international market.

Refineries like Dangote still have to secure crude, which creates a significant distinction for the Nigerian petroleum industry. Despite being a crude-oil-producing country, Nigeria's refineries face costs in obtaining crude. This highlights the importance of understanding what it actually costs the refinery to obtain the crude it needs rather than just watching Brent crude oil prices.