Why Global Oil Prices and the Naira Keep Petrol Expensive in Nigeria

Petrol prices in Nigeria are influenced by more than local politics. Global oil prices, the naira exchange rate and disruptions such as a blockade of the Strait of Hormuz can all raise the cost of crude oil. Brent crude is a global benchmark. Nigerian crude often sells above Brent because it is light and low in sulphur, making it cheaper to refine into petrol and diesel. Dangote Refinery still needs to buy some crude at prices linked to international dollar markets, even when part of its supply is paid for in naira. NNPC cannot simply sell all crude locally at a lower price. Much of Nigeria’s output is committed under joint-venture contracts, while selling crude below international prices would amount to a government-funded subsidy. Refining, distribution and transport costs also add to the pump price. This means that when crude prices rise abroad or the naira weakens, Nigerian motorists and transport users can feel the impact at filling stations.

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