Expert breaks down why PMS may hit ₦1,200 in Nigeria despite Dangote’s local refining success

• Energy economist Kaseem Abidemi Obakhume has explained wherefore petrol prices stay precocious contempt section refining.
• In an investigation sent to Legit.ng, helium cited planetary crude pricing and forex volatility arsenic cardinal drivers.
• He besides warned PMS whitethorn merchantability for ₦1,200 without targeted authorities alleviation connected crude, logistics, and forex.

Despite Nigeria’s propulsion for home refining with the commissioning of the Dangote Refinery and others, pump prices for Premium Motor Spirit (PMS) stay precocious crossed the country. This concern has near galore Nigerians questioning wherefore petrol remains costly adjacent though it is present being refined wrong the country.

Crude lipid inactive priced successful dollars, Obakhume says section refining unsocial won’t chopped substance prices. Photo credit: @drpenking, @OvieAli
Source: Twitter

Energy economist Kaseem Abidemi Obakhume, successful an investigation sent to Legit.ng, outlined the aggregate outgo drivers and macroeconomic conditions that explicate this trend. He noted that portion home refining reduces immoderate elements successful the petroleum proviso chain, it does not isolate Nigeria from planetary pricing dynamics and interior structural challenges.

According to him, 1 of the main reasons petrol prices stay precocious is that crude oil, the superior earthy worldly for refining PMS, is inactive sold to section refineries astatine planetary benchmark prices. This includes notation prices specified arsenic Brent, WTI, and Nigeria's ain Bonny Light. These prices are denominated successful U.S. dollars, and section refineries, including Dangote, acquisition crude astatine these planetary rates.

His words:

“The cardinal crushed is that home refining is not immune to the ascendant outgo drivers that signifier PMS pricing, galore of which stay tied to planetary and macroeconomic variables."“Crude oil, the superior feedstock for PMS, is inactive priced connected the planetary market, adjacent erstwhile refined locally. Dangote Refinery and different Nigerian refineries acquisition crude astatine the planetary benchmark (such arsenic Bonny Light, WTI, Brent, etc.), which are denominated successful U.S. dollars."

He furthered that with Bonny Light trading supra $75 per tube as of June 25, 2025, and the naira exchanging astatine astir ₦1,600 to the US dollar, the outgo of crude lipid unsocial exceeds ₦120,000 per tube erstwhile converted locally.

Obhakume, however, explained that geopolitical tensions, including conflicts specified arsenic the Israel-Iran situation and the ongoing Russia-Ukraine war, proceed to exert upward unit connected planetary crude prices.

“Current geopolitical tensions, including the Israel-Iran struggle and the ongoing Russia-Ukraine war, person heightened risks successful cardinal maritime chokepoints specified arsenic the Strait of Hormuz and the Red Sea, driving up some freight and crude lipid prices.”“These pressures are particularly important erstwhile crude is imported, arsenic shipping costs, marine insurance, and planetary larboard charges further summation the full cost.”

The adept pointed retired that refining the crude lipid locally besides incurs its costs:

“This includes the operational costs of converting crude to PMS. That is, vigor use, chemicals, labour, maintenance, and overhead. Typically, refining 1 tube of crude costs astir $5, oregon ₦8,000 astatine ₦1,600/$.”

He added that, connected average:

“The estimated outgo of refining 1 tube of crude is betwixt $3 and $5 (source: IndexBox), which further adds to the retail terms of PMS. Also, the removal of subsidies successful the deregulated downstream assemblage means that the prices present bespeak the marketplace reality. There is nary authorities involution to subsidise the costs to the consumers, arsenic was the lawsuit with the subsidy regime.”

Forex volatility, transport costs thrust prices up - Obakhume

In summation to the crude lipid feedstock and refining costs, helium disclosed that different proviso concatenation factors lend to the last pump price.

The vigor economist noted that inland proscription from refineries to depots, storage, depot handling, and the outgo of distributing petrol to filling stations each adhd important value.

In areas acold from the seashore oregon large depots, helium said bridging costs “can adhd betwixt ₦70 and ₦100 per litre.”

Retailers, helium said, besides use their margins to screen operational expenses:

“Fuel presumption operators typically adhd a regulated oregon market-determined borderline per litre to screen operating expenses (salaries, rent, power, POS charges) and profit. Varies astir ₦30–₦50/litre depending connected determination and presumption ownership model.”

Petrol whitethorn outgo ₦1,200 without forex relief, Obakhume tells Legit.ng successful a elaborate breakdown. Photo credit: @asafaabdulwasi2, @BrandIconImage
Source: Twitter

Furthermore, the adept emphasised the interaction of the naira's volatility.

“Foreign speech volatility is simply a large factor. Since galore inputs for the cognition of the refinery are imported, the naira–dollar speech complaint fluctuations effect successful higher naira costs of production, adjacent though the refining is done locally. It is lone erstwhile Nigeria has a unchangeable currency and a pricing mechanics for crude lipid that applies lone to home refiners that the section refining volition effect successful little PMS prices for the consumers.”

He besides referenced existing regulations specified arsenic the 1% levy imposed by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), arsenic stipulated successful the Petroleum Industry Act (PIA) of 2021.

While PMS is exempt from Value Added Tax (VAT), this NMDPRA levy is calculated connected the wholesale terms and contributes to the last outgo borne by consumers.

Putting each these together, Obakhume explained that a emblematic litre of PMS costs astir ₦910 erstwhile breached down by crude cost, refining, distribution, taxes, and retail margins.

Component	Value ($/bbl)	Value ($/Litre)1 bbl of crude lipid = 76.5 litres of PMS	Value (₦)/litre$1 = #1,600
Crude Oil Cost (45% of $75)Refining Cost (45% of $5)	33.752.25	$0.44$0.03	₦705.88₦47.06
Subtotal (Before NMDPRA Levy)			₦752.94
NMDPRA Levy (1%)Estimated Distribution & Marketing Costs Estimated Retailer's Margin			₦7.53₦100.00₦50.00
Estimated Pump Price			₦910.47

NB:

• A tube of crude produces astir 170 litres of petroleum products. Gasoline (also known arsenic PMS oregon colloquially arsenic petrol) makes up astir 45% of these achromatic products.
• 1 tube of crude lipid = 45% of 170 litres = 76.5 litres of PMS
• At $75/bbl., the outgo to nutrient 1 tube of PMS (or 76.5 litres of PMS) = 45% of $70 = $33.75
• Assuming a full refining outgo of $5, past the outgo to refine 1 tube of PMS = 45% of $5 = $2.25

He estimated that the pump terms volition apt stay betwixt ₦750 and ₦1200 per litre successful the coming months if crude prices enactment betwixt $60 and $100 per tube and the naira trades betwixt ₦1500 and ₦1600 per dollar. Inland areas, helium said, volition proceed to acquisition the higher extremity of the scope owed to accrued logistics costs.

He, however, noted that “strategic interventions” by the federal government could mean this trend. These see providing terms alleviation connected crude lipid feedstock for home refiners, improving overseas speech liquidity, and offering targeted enactment for organisation and logistics. Unless specified measures are introduced, the combined effect of planetary lipid marketplace volatility, speech complaint instability, and interior inefficiencies volition proceed to support pump prices elevated.

Heating representation showing the estimated pump terms of PMS successful Nigeria. Photo credit: KaaseBiweekly
Source: UGC

Obakhume concluded that portion section refining offers imaginable semipermanent benefits, it cannot by itself insulate Nigeria from broader economical forces.

“Until these are addressed holistically, peculiarly speech complaint management, home vigor infrastructure, and crude pricing policy, PMS prices volition proceed to beryllium driven by some section inefficiencies and planetary pressures,” helium said.

Experts impulse enactment for section refineries

Meanwhile, Legit.ng reported that the Conference of Energy & Finance Consultants urged lipid regulators to protect crude proviso for section refineries.

The radical warned against halting proviso to Dangote and others, saying it benefits substance importers and risks sabotaging Nigeria’s refining ambitions.

They besides called connected the National Assembly to enactment fast, analyse imports, and guarantee uninterrupted crude transportation to each home refineries.

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Source: Legit.ng