Nigeria’s diesel market is experiencing renewed turbulence as the average price per liter rose by 1.93% month-on-month in August 2024, reaching N1,406.05 per liter, according to data released by the National Bureau of Statistics (NBS).
This increase comes just weeks after a brief respite in July when prices had dropped by 5.71%. The latest hike adds a fresh challenge to a diesel market already grappling with challenges, including an ongoing standoff between local fuel marketers and the Dangote Refinery.
The volatility in diesel pricing has been a notable issue for Nigerian consumers. According to the NBS, in June 2024, the average price of Automotive Gas Oil (diesel) was N1,462.98 per liter, but this dropped to N1,379.48 in July, offering temporary relief to both businesses and households reliant on diesel.
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The NBS report further detailed a significant 64.58% year-on-year increase in diesel prices, with consumers paying N854.32 per liter in August 2023 compared to the N1,406.05 recorded in August 2024. Diesel prices vary across regions, with northern states seeing the steepest prices. Kaduna tops the list at N1,930.79 per liter, closely followed by Bauchi at N1,927.34. Meanwhile, southern states like Lagos and Ogun enjoy the lowest prices, at N1,237.14 and N1,255.00, respectively.
The report read: “The average retail price of Automotive Gas Oil (Diesel) paid by consumers increased by 64.58% on a year-on-year basis from a lower cost of N854.32 per liter recorded in the corresponding month of last year (i.e., August 2023) to a higher cost of N1,406.05 per liter in August 2024.
“On a month-on-month basis, an increase of 1.93% was recorded from N1,379.48 in July 2024 to an average of N1,406.05 in August 2024.”
The Dangote Refinery Impact
Much of the current diesel pricing conundrum is linked to an ongoing boycott by local fuel marketers who are resisting purchasing diesel from the newly operational Dangote Refinery. Despite the refinery’s ability to produce diesel at lower costs, local marketers prefer to continue importing more expensive fuel from abroad, effectively bypassing the domestic supply.
Dangote Refinery, which began supplying diesel and aviation jet fuel in April 2024, initially spurred optimism with its promise of lower prices. Aliko Dangote, Africa’s richest individual and founder of the refinery, announced earlier this year that his operations had reduced the price of diesel from around N1,700 per liter to about N1,000, marking a significant price reduction.
However, local fuel marketers have largely avoided purchasing from the refinery. During a recent X (formerly Twitter) space hosted by Nairametrics, Devakumar V.G. Edwin, Vice President of Dangote Industries Limited, expressed frustration over this boycott.
“We have reduced prices significantly. Despite the exchange rate rising to about N1,500 per dollar, we have managed to keep the price of diesel below N1,200,” Edwin said.
Yet, the market remains resistant. “Only 3% of our diesel output is being purchased locally, while 97% is being exported because the local traders have refused to buy our products,” Edwin added.
This resistance has forced Dangote Refinery to look beyond Nigerian borders, exporting most of its diesel and jet fuel production instead of meeting local demand. Edwin lamented that despite their efforts to offer more affordable petroleum products, the local market’s reluctance to engage with the refinery is impeding the intended impact on diesel prices.
Marketers vs. Local Production
The underlying issue seems to stem from market dynamics deeply rooted in long-standing practices. Local fuel marketers, who are accustomed to importing refined diesel, appear hesitant to switch to domestic production, even when the Dangote Refinery offers a more cost-effective solution.
Edwin pointed out that, “many traders in Nigeria have refused to purchase from the refinery, preferring to continue importing refined products from abroad.”
This preference for imported diesel is believed to have wider implications, as it not only keeps prices elevated but also limits the effectiveness of local refineries in curbing inflation.
Consumers Caught in the Middle
For the average Nigerian consumer, this standoff means a continued struggle with high fuel prices. Consumers in regions like Kaduna and Bauchi are paying close to N2,000 per liter, while those in Lagos and Ogun pay around N1,200.
Analysts have noted that the current diesel pricing trend paints a troubling picture, and unless there’s a significant shift in the market dynamics, consumers will continue to bear the brunt of these price hikes.