Izielen Agbon

There is a need for a working class perspective on fuel subsidy. Like minimum wage, fuel subsidy is going to be one of the most contentious issues in the upcoming 2027 elections. The current national debate on fuel subsidy began when Taiwo Oyedele, the Finance Minister declared that N15.8 trillion was saved between June 2023 and December 2025 from the removal of fuel subsidy or PMS price increase. This was surprising given that the former Minister of Finance and Coordinating Minister of the Economy, Wale Edun, had stated during his the presentation of the Accelerated Stabilisation and Advancement Plan (ASAP) report that “At current rates, expenditure on fuel subsidy is projected to reach ₦5.4 trillion by the end of 2024. This compares unfavorably with ₦3.6 trillion in 2023 and ₦2.0 trillion in 2022”. Furthermore, NNPCL’s 2024 audited accounts had reported ₦8.67 trillion as ‘under-recovery’ which is the company’s terminology for fuel subsidy. The Finance Minister tried to explain where the N15.8 trillion fuel subsidy savings had gone. He claimed that N5.4 trillion of the fuel subsidy savings went to the federal government, while N10.4 trillion was shared among state and local governments. Nigerian workers did not accept this explanation. Neither did opposition politicians.

The African Democratic Congress presidential candidate and former Vice President, Atiku Abubakar, demanded proof of tangible benefits for citizens from the so called fuel subsidy savings. He promised to restore petrol subsidy if elected president in 2027 by selling crude oil to local refineries at preferential prices. He argued that the Tinubu administration implemented the subsidy removal policy suddenly and without sufficient preparation. He would introduce a gradual transition combined with refinery production subsidy, anti-corruption measures and targeted support. However, a production subsidy will not result in lower PMS prices in an oligopolistic market. Rather, it will only increase the oligopolistic profits of Dangote Petroleum Refinery and the PMS importers (international traders and indigenous marketers.)

The presidential candidate of the Nigeria Democratic Congress (NDC), Peter Obi, maintained his support for the removal of petrol subsidy. He plans to remove the fuel subsidy in an organized manner, and invest the subsidy savings appropriately for the benefits of the masses. He criticized the Tinubu administration for not utilizing the fuel subsidy savings to improve health care or our sovereign wealth fund. The Social Democratic Party (SDP) presidential candidate, Adewole Adebayo , argued that President Bola Tinubu’s abrupt removal of the fuel subsidy was poorly planned and executed without adequate economic groundwork or prior stakeholder consultation. He was for a planned subsidy removal as part of an overall energy production costs reduction strategy in Nigeria. All the above opposition candidates were in support of the IMF program of PMS price increase or fuel subsidy removal. They were only opposed to how the APC Tinubu administration implemented the policy and the resulting poverty it has caused the Nigerian masses.

Former Cross River State Governor and presidential candidate of the Peoples Redemption Party (PRP), Donald Duke, insisted  that no real subsidy ever existed and declared that Nigeria’s fuel subsidy was a scam. He pointed out that there are many petroleum products derived from a barrel of crude oil. A refined barrel (42 gallons) of crude oil gives 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Hence, it is economically feasible and profitable to sell other products at commercial rates and PMS at N200/litre. Donald Duke was a member of the Professor Sam Aluko National Economic Intelligence Committee in the mid-1990s. The committee examined the Abacha regime imposed PMS price of N11/litre and found out that there was no subsidy. The production cost based PMS price was N5.68/litre. All extra funds received from the sale of PMS at N11/litre was saved in the Petroleum Trust Fund (PTF). General Muhammadu Buhari managed the PTF operations. The PTF was used for the rehabilitation of urban and rural roads, expansion of railways and telecommunications systems, provision of essential drugs, hospital equipment,  renovation of healthcare facilities nationwide, distribution of textbooks, provision of classroom furniture, infrastructure upgrades across educational institutions, construction of boreholes and rehabilitation of urban water supply systems. Nigerian workers could see the visible projects that some of the money was spent on.

The presidential candidate of the African Action Congress (AAC), Omoyele Sowore maintained his opposition to the removal of fuel subsidy, devaluation of the Naira and other IMF sponsored policies. He has always insisted that fuel subsidy was a ruling class scam organized by the oil cabal (international traders and Nigerian petroleum products marketers). He argued that high PMS price increased economic hardships for the Nigerian masses and only benefitted the political elite and State governors. He claimed that corruption  was the real problem and removing subsidy only transferred the corruption costs to the ordinary citizens. He promised to reduce PMS prices and revive Nigeria’s four government owned domestic refineries if elected president. He concluded that  “in the first place, they’re still paying subsidies. They’re just changing the name of what they call it.” NNPCL’s 2024 audited accounts reported ₦17.5 trillion in energy-security costs and PMS under-recovery.

In response to all these criticisms, the Tinubu administration pointed to its cash transfer and palliatives programs for poor households. These programs included the Compressed Natural Gas (CNG) Initiative and Direct Cash Transfer. Although a nationwide natural gas distribution pipelines network was absent, 81 companies were licensed to retail CNG. CNG prices were fixed at N380/SCM for cars and buses and N450/SCM for commercial trucks. A fleet of 64 CNG buses were donated to trade unions and student unions and more CNG refueling stations were built. More than 120,000 private and commercial vehicles, out the estimated 15 million registered motor vehicles in Nigeria, have been converted to CNG. Past CNG programs had failed due to limited pipeline/road infrastructure, standardized conversion centers and inconsistent natural gas utilization policies. A CNG pilot program was initiated in 2003. In 2010, Edo State built a CNG plant in Benin City that supported more than 5000 vehicles. The NNPC  launched many failed CNG programs after 2010. Nigerian workers believe the current CNG program will failed given that the constraints of limited pipeline/road infrastructure, standardized conversion centers and inconsistent natural gas utilization policies have not been addressed.

The Tinubu administration also initiated a new $1 billion household prosperity and economic social protection project (HOPE-SP) under its IMF sponsored Direct cash Transfer Programs. The project would improve the identification, targeting and support of poor households. Under the program, 7 million poor households with valid National Identification Numbers (NIN) will get a  one-off digital cash transfer of N40,000. It has also approved a N600 billion fund for the Renewed Hope Women and Youth Development Programme to disburse N50,000 monthly to targeted households in Q4, 2026. The Tinubu administration claimed to have paid 15 million poor households N75,000 split into three monthly installment of N25,000 since June 2023. The Ministry of Humanitarian Affairs records only about 10 million households. Independent audits reported that more than N33.75 billion went to 3.29 million fake households. The audits found N36.74 billion were processed with unaudited 215 payment vouchers while ₦4.616 billion lacked supporting vouchers.

The whole program was backed by an $800 million World Bank facility credit line under its National Social Safety Net Programme-Scale Up (NASSP-SU) program. The World Bank has disbursed $744.61 million leaving only $55.39 million in the account. The World Bank also approved an additional $1.25 billion loan under the Nigeria Actions for Investment and Jobs Acceleration program of its Broader Country Partnership Framework (2026–2032). The program failed because of corruption and mismanagement. A lot of poor Nigerians have no bank accounts. Direct Cash Transfers were supervised by  new bureaucracies such as the National Social Safety Nets Coordinating Office (NASSCO), the National Steering Committee (NSC), National Cash Transfer Office (NCTO), state steering committee (SSC), state operations coordination unit (SOCU) and state cash transfer units (SCTU) whose establishment were required as part of the condition for the $800 million loan.  

The Federal government has established many failed cash transfer programs in the past. The COPE program transferred cash to poor households with school-aged children or maternal health requirements. Under the National Social Investment Programme (NSIP), the NCTO ran the Household Uplifting Programme-Conditional Cash Transfer (HUP-CCT) with little or no impact on Nigeria’s poverty levels. In 2013,  a study of SURE-P programs concluded that many of the palliatives and the N20,000 cash disbursements funds meant for poor Nigerians were diverted, hoarded and stolen. In 2020, under the COVID-19 Relief Cash Transfers, the N20,000 meant for poor households were stolen and the palliatives were hoarded. The Nigerian masses had to force open the warehouses physically and appropriate the hoarded palliatives. Nigerian workers do not see any benefits with IMF/World Bank cash transfer and palliatives programs meant to protect poor households from the negative economic impact of PMS price increases or fuel subsidy removal. They demand that PMS should not be sold at international prices.

There are two basic methods for determining PMS prices. These are the production cost pricing (PCP) method and the import parity pricing (IPP) method. The production cost pricing method assumes that the PMS price is based on the cost of crude oil production, refining, transportation and distribution in the domestic market. This method implies that the crude oil is produced and refined in the country. In this pricing method, the PMS pump price is the cost of crude oil at the refinery gate, the refining cost, the distribution and marketing cost and the taxes. Most oil producing nations use the production pricing model for PMS prices in their domestic market. The production cost pricing method is used in USA for the determination of fuel prices. In Texas, USA, the cost components of PMS shows that crude oil cost makes up 51% of the PMS prices, refining cost make up 21%, Distribution and Marketing make up 11% and Taxes make up the remaining 17%.

The cost to produce one barrel of crude oil in Nigeria ranges from $31 to $48. This is significantly higher than the global average of $12 per barrel and is affected by aging infrastructure, insecurity, sabotage, theft, and the high cost of imported oilfield inputs. The NUPRC plans to reduce  future crude oil production costs to $20 per barrel. Refining costs range from $38/MT to $115/MT and Transport (Road Trucking-Gantry) costs range from $20/MT to $35/MT.  The average earnings before interest, taxes, depreciation and amortization (EBITDA) is 20% and the Gross refining Margin (GRM) range from  $20 per barrel to $25 per barrel. Under the Nigeria Tax Act effective January 1, 2026, domestic sales of refined petroleum products from local refineries and depots are exempt from Value Added Tax (VAT). Thus, for NNPCL owned refineries, the production cost pricing method should give a PMS pump price between N435/litre and N687 per litre (at N1333/$1 exchange rate). Form a working class perspective, the production cost pricing method enables NNPCL to replace Dangote Petroleum Refinery as a base PMS price setter and  the PMS supplier of last resort in the Nigerian petroleum products market.

The import parity price method assumes that the production and refining of crude oil are done overseas and the PMS imported into Nigeria. The imported petroleum products are transported by pipelines, vessels, and barges to domestic storage facilities. The petroleum products are then transported by road tankers to domestic petrol stations. The  method assumes that all input prices are equivalent to  international import prices. There should be no barriers between the international and domestic PMS markets. The import parity price method consists of three components. The first component is the opportunity cost of getting the fuel to the consumers. This is the cost of importing the fuel into the country and transporting it to the consumers. This cost is viewed as revenue foregone by consuming the fuel domestically rather than exporting it. It does not matter if the crude oil was produced at a cost far below its export price and refined in the country. The second component is the environmental cost associated with the fuel consumption. The third component is a consumption/sale tax aimed at raising revenue. There are not environmental costs or consumption taxes imposed on PMS prices in Nigeria. Nigerian workers successfully resisted the attempt of the Tinubu administration to impose a 5% sale tax on PMS. The implicit fuel subsidy is the product of the volume of PMS consumed nationally and the difference between the import parity price and the actual PMS pump price in the country.

The IMF economic premise that the import parity pricing method should govern petroleum products sales in Nigeria and other oil-producing nation is incorrect. It discourages self-sufficiency in refining and petroleum products supply to meet national demand. The method does not recognize the concept of comparative advantage for oil and gas producers/exporters. It does not capture the negative effects of eliminating the barriers between the international and domestic markets with respect to long term sustainable economic development. The import parity price method is only applied to developing nations as part of the conditionalities for IMF loans. It does not apply to developed nations where fuel subsidies express themselves as post tax depletion allowances, tax breaks and liberal regulation enforcement. Although, labour power is just a commodity like PMS, the import parity pricing method is not used for the determination of the monthly minimum wage. Hence, the real purchasing power of workers had decreased with every increase in PMS prices and the resulting inflationary impact on the economy. The history of PMS price increases in Nigeria shows that the import parity pricing method is not a solution to the problems of mismanagement and corruption in the national PMS delivery system.

The import parity pricing method governs the pricing of imported PMS in Nigeria. It forms the basis of the independent Nigerian marketers PMS price template. The Amsterdam-Rotterdam-Antwerp (ARA) Hub in Northwest Europe is the main European pipeline for Nigerian fuel imports. The NMDPRA issues import licenses to independent marketers to ensure energy security, a competitive domestic PMS market and constrain the oligopolistic behavior of Dangote Petroleum Refinery. It introduced the Midstream and Downstream Petroleum Prevention of Anti-Competitive Practices and Behaviour Regulations. This law explicitly bars domestic companies from price-fixing, manipulating supply, or using market dominance to harm consumer interests. Dangote Petroleum is opposed to the participation of the independent marketers in the domestic PMS market. Between January and July 2026, domestic refineries supplied approximately 74.9% of Nigeria’s petrol, while imports accounted for 25.1%. In May 2026, PMS imports averaged 5.9 million litres per day. PMS  imports then increased to 18.1 million litres per day in June before rising to 19.7 million litres per day in July. At the same time, petrol supplied by domestic refineries fell from 32.5 million litres per day in June to 25.8 million litres per day in July. Combined domestic and imported supply stood at an average of 45.5 million litres daily in July, with imports accounting for roughly 43.3% of the total. From a working class perspective, the PMS imports need to be replaced by domestic PMS production from the repaired 4 government owned refineries. This will ensure national self-sufficiency in petroleum products.

The PMS price template of Dangote Petroleum Refinery is also based on the import parity pricing method. Dangote Petroleum Refinery defines  the Retail PMS Pump Price as the sum of the Ex-Gantry Price, Logistics & Distribution Costs, Regulatory Charges and Marketer Margins. It buys crude oil in Naira from NNPCL at an Official Selling Price (OSP). The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) sets its Official Selling Prices as price differentials or premiums/discounts relative to global benchmarks like Dated Brent. The Official Selling Price (OSP) differential for Qua Iboe crude oil for September 2026 loading cycles is set at a premium of $1.75 per barrel above the Dated Brent benchmark index. Brent crude oil price for September 1, 2026 was $95.5/barrel.

Dangote Petroleum Refinery controls more than 50% of the domestic PMS market. Hence, it sets oligopolistic PMS prices in Nigeria. The market is not a free market. Dangote oligopolistic PMS price is indexed in USD as its wholesale gantry rate is set at $0.779/litre. The marketers pay for the PMS in Naira based on the daily official CBN exchange rate. This system protects Dangote  Petroleum against the volatility of the Naira. Sometimes, the PMS price at the spot market is less than the Dangote Ex-gantry price resulting in cheaper imported PMS. For instance, on March 23, 2026, the refinery’s ex depot petrol price stood at N1,275 per litre, compared with an estimated import parity spot price of  N1,122 per litre, creating a price differential in favor of imports. S&P Global energy data showed that between March and May 2026, around 70% to 80% of Nigeria’s seaborne imported PMS originated directly from the Dangote Petroleum Refinery but was routed back into Nigeria via the Lomé offshore hub. In this Lome Circular trade route, International oil trading firms anchored at Lomé (like Vitol, Trafigura, Glencore & Gunvor and Mercuria) purchase PMS from Dangote Petroleum in massive global volumes with volume-based discounts. Independent Nigerian marketers buy these cargoes from the international traders at a lower price than the Dangote Ex-gantry price and undersell Dangote Petroleum in the Nigerian domestic PMS market.

Dangote Petroleum Refinery sets the base Oligopolistic PMS price in Nigeria. For instance, on August 21, 2026, Dangote Petroleum Refinery increased its petrol price from N1,165/litre ($0.874/litre) to N1,185 /litre ($0.89/litre) before raising it to N1,200/litre ($0.90/litre) on August 26. Three days later, it raised the price again to N1,265 per litre ($0.95/litre). On September 1, 2026, the CBN $/N exchange rate was N1333/$1. PMS sold for $0.774/litre (N1040/litre) at the Costco petrol station in Mansfield, Texas. However, Dangote’s ex-gantry price was $0.95/litre (N1265/litre) and petrol stations in Lagos and Ogun states  sold PMS at about $0.98/litre (N1310/litre). In Abuja and FCT, PMS sold for about $1.01/litre (N1350/litre) where in Kaduna and Sokoto, it sold for $1.05/litre (N1,400/litre).  It does not make any economic sense Nigerians pay more for PMS in Nigeria than in Texas. A history of PMS price increases or subsidy removal in Nigeria shows that an implicit fuel subsidy never existed and the so called subsidy system was just a cesspool of corruption.

In the mid 1980’s, the IMF introduced structural adjustment programs (SAP) as conditions for loans to developing nations. SAP policies encompassed reductions in government spending and employment, higher interest rates, currency devaluation, lower real wages, sale of government enterprises, reduced tariffs, and liberalization of foreign investment regulations. The IMF recommended that domestic commodities must be priced at international import parity levels even when they are produced locally. This was expected to eliminate the difference between local production cost prices and import parity prices or impose an implicit subsidy removal. The IMF recommended targeted aid in the form of direct cash or food stamps to the poorest families. The failure of the IMF’s SAP did not stop the IMF’s efforts to increase energy prices or remove energy subsidies in developing nations. Special attention was paid to PMS and other petroleum products. The IMF strategy was for the government to impose phase and sequence fuel price increases, implement targeted mitigating measures for the poor and establish an automatic pricing formula for fuel products that linked domestic energy prices to international energy prices and distanced the government from the pricing of energy.

In 1986-1986, the official exchange rate increased from N0.894/$ to N2.02/$ and PMS prices were increased from N0.2/litre to N0.395/litre. The PMS price remained stable until 1990 when it increased to N0.6/litre in response to rising exchange rates. In 1994, under the Petroleum (Special) Trust Fund (Amendment) Decree No.25, 1994, the Abacha administration raised the price of PMS to ₦11/litre to eliminate fuel subsidy. The Aluko National Economic Intelligence Committee was mandated to examine the issue of fuel subsidy. The committee found that there was no fuel subsidy. The PMS production cost of PMS was N5.68/litre. Crude oil production cost made up 43.37% (N2.35) of this amount. The Marketers’ Allowance made up 22.88% (N1.30), Excise Duty & VAT was 5.81% (N0.33) and NNPC refining Cost/Margin was 29.93% (N1.70). The excess revenue raised due to the difference between the N11/litre pump price and production cost price of N5.68/litre was used to set up the Petroleum Trust Fund.

After 1999, PMS prices were influenced by the rising exchange rates and the Federal Government decision to impose import parity prices on PMS in response to pressure from the IMF. In 2001, the Federal Government informed IMF staff that it has “made major strides in gaining public support for the deregulation of the downstream petroleum sector and the associated removal of petroleum subsidy”. The following year (2002), the IMF Staff stated, “Progress on structural reforms has been mixed. On the positive side, on January 1, 2002, the authorities adjusted the maximum retail price of gasoline above import parity and began charging the NNPC $18 per barrel for crude oil used for domestic consumption, compared with a charge of $9.5 in 2001”.  The NNPC refineries had 445,000 barrels/day of crude oil dedicated to the supply of PMS to the Nigerian market. Since the refineries were not running at full capacity, a swap program was developed to make up for the short fall. This swap program entailed the NNPC refining the rest of the crude oil abroad, bringing the PMS into Nigeria and selling the rest of the petroleum products in the international market. The introduction of import parity pricing to NNPC crude oil supply while maintaining production cost pricing of petroleum products in the domestic market, created a financial crisis and the introduced subsidy payments. The privatization of petroleum product supply encouraged  more corruption and the mismanagement of Nigerian 4 refineries. It was more profitable for the Oil cabal consisting of international oil traders, Nigerian marketers, NNPC officials and government functionaries to import petroleum products than repair the 4 refineries.

In 2012, the President Jonathan administration increased PMS prices from N65/litre to N145/litre as part of its policy of fuel subsidy removal. The Nigerian masses resisted the PMS price increase and forced the government to reduce the PMS price to N87/litre. The House of Representative set up an investigative committee to study the nation’s fuel subsidy regime. The Farouk Lawan House of Representative Ad-hoc Committee on Fuel Subsidy discovered a lot of corrupt activities in the fuel subsidy program. The committee found deliberate neglect for record keeping, payments for billions of litres that were never supplied, and more than $6.8 billion refunds due to the Treasury. It recommended the recovery of $6.8 billion of misappropriated or illegally claimed subsidy funds between 2009 and 2011 from 72 fraudulent fuel importers, marketers and senior government officials. The Federal Government set up the Aigboje Aig-Imoukhuede committee in response to a bribery allegation against Hon. Lawan. The Aigboje Aig-Imoukhuede committee indicted 25 companies and identified an over payment of $2.5 billion. The committee questioned the legitimacy of an additional $1.5 billion worth of transactions.

The IMF staff argued that “a number of reasons make the subsidy issue so knotty. First, it is difficult to convey to the public the rationale for products to be sold at their opportunity cost and not their cost of production. Second, in many cases, the subsidy is implicit, absorbed in the revenue of the state oil company, and thus the subsidy costs are not well understood by the population. Third, on the side of the government, the subsidy costs, although potentially high, are usually affordable.”  In reality, the subsidy issue was knotty because Nigerian workers could see no concrete benefits in increased PMS prices. The IMF concluded that “the impact of increasing domestic fuel prices on the welfare of households arises through two channels. First, households face the direct impact of higher prices for fuels consumed for cooking, heating, lighting, and personal transport. Second, an indirect impact is felt through higher prices for other goods and services consumed by households as higher fuel costs are reflected in increased production costs and consumer prices.” Therefore, the IMF advised that governments should implement targeted mitigating measures to mitigate the impact of PMS price increases on the poor.

The targeted measures were incorporated into a Subsidy Reinvestment and Empowerment Program (SURE-P).  The SURE-P program included: “ 1. Urban mass transit—Increasing mass transit availability by facilitating the procurement of diesel run vehicles (subsidized loans, reduced import tariffs, etc. to established operators). In the first step of this program, the government intended to import 1600 buses within months.  2. Maternal and child health services—Expanding the conditional cash transfer program for pregnant women in rural areas; and upgrading facilities at clinics.  3. Public works—Providing temporary employment to youth and women from the poorest populations in environmental projects and maintaining education and health facilities.  4. Vocational training—Establishing vocational training centers across the country to help tackle the problem of youth unemployment.”  The FGN put the disbursement of its share of SURE-P under the Christopher Kolade Committee.

The Kolade Committee was to ensure that SURE-P federal programs such as maternal child health, public works, mass transit, West-East Road, Roads & bridges, railway and secretariat services were successfully executed. The Kolade committee began work with a lot of fanfare. However, it was not long before the contradictions in the sharing formula intensified the disagreement amongst the ruling stakeholders. The State Governments opposed the direct deduction of subsidy funds from State budgetary allocations at source. They accused the FGN of giving SURE-P contracts to only the supporters and cronies of the Presidency. The FGN accused the State Governments of giving their share of SURE-P funds to the political friends of the individual state governors through the State Implementation Committee (SIC). The Subsidy Reinvestment and Empowerment Programs in the Agriculture, Education, Health, ICT, Petroleum, Power, Water Supply, Road and Rail transportation sectors, as well as Public Works and Youth Employment programs did not lead to the transformation of public infrastructure in Nigeria, nor the gainful employment of millions of Nigerians. The government failed to establish credibility for its promise that the proceeds from the removal of the subsidy will be used for the benefit of the broad population. The whole program was a failure due to lack of capacity, inefficiency and corruption.

In May 2015, The Buhari administration increased PMS price to N97/litre and later to N145/litre in order to raise revenue and met IMF expectations of subsidy removal. Four years later, the IMF in its 2019 Article IV Consultation on Nigeria “noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space in the country.” The importation of PMS into Nigeria was managed by two government entities: the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Products Pricing Regulatory Agency (PPPRA). The NNPC ran a Direct Sale of Crude Oil and Direct Purchase of Petroleum Product (DSDP) program to ensure sustained product supply in the country. Under the DSDP program, the NNPC delivered “monthly crude oil lifting on Free on Board (FOB) basis to supplier who shall in return, delivered petroleum products of Nigerian standard specification to NNPC on Delivered at Place (DAP) basis, at designated safe port (s) in Nigeria. The petroleum products delivered was equivalent in value to the Crude Oil received from NNPC subject to the general terms and conditions as would be advised to successful companies subsequently via Term Sheet (TS)”. The PPPRA determined the pricing policy of petroleum products. In 2019, the Direct Sales, Direct Purchase (DSDP) program involved 15 trading companies and refiners including BP, Total, Vitol, Gunvor, Trafigura, Mercuria and Mocoh, along with domestic companies such as Sahara Energy and NNPC’s trading venture Duke Oil. The four government owned refineries (PHRC I and II, Kaduna and Warri) were shut down for rehabilitation. Thus, Nigeria imported nearly all its petroleum products requirements. Under its Direct Sales, Direct Purchase (DSDP) program, the NNPC exchanged $7.012 billion worth of crude oil for PMS which it sold for $7.084 billion in the Nigerian market, thereby making  a profit of $71.94 million on PMS importation. Yet, NNPC collected $1.602 billion as fuel subsidy during that year.

In March 2020, the federal government set up a Price Review Committee (PRC), whose duty was to meet once a month to review prevailing price of petrol. The PRC decided that fuel prices should be increased from N148 per litre to N162 per litre in order to remove fuel subsidy. This decision was approved by the PPPRA, the Ministry of Petroleum Resources and the Federal government. PMS prices rose from N121.50–N123.50 per litre in June 2020 to N140.80-N143.80 in July 2020, N148-N150 in August 2020 and N158-N162 in September 2020. In November 2020, the FGN increased PMS prices to N168/litre and further increased electricity tariffs. The labour unions opposed the increase in fuel and electricity prices. The Buhari administration argued that fuel subsidy has ended and fuel prices were determined by market forces. It insisted that lower fuel prices encourage smuggling of petroleum products into neighboring West African nations. It argued that the fuel price hike was beneficial to the Nigerian masses and the Nigerian economy. It insisted that the fuel subsidy bill was unsustainable. The price of many basic commodities and services increased as a result of the fuel price hikes. Further discussions between the FGN and labour unions leaders forced the FGN to reduce the PMS prices to N163/litre. In 2020, under the DSDP program, the NNPC exchanged $6.169 billion worth of crude oil for PMS which it sold for $6.660 billion in the Nigerian market. It made a profit of $490.57 million on PMS importation and  claimed $370.47 million as fuel subsidy. In 2021, the NNPC exchanged $6.787 billion worth of crude oil for PMS which it sold for $8.850 in the Nigerian market. It made a profit of $2.063 billion on PMS importation and claimed $2.898 billion as fuel subsidy. It claimed a fuel subsidy of ₦2.0 trillion in 2022 despite selling its DSDP PMS at a profit in the Nigerian market.

In 2023, the National Economy Sub-committee of the Policy Advisory Council of the Tinubu administration developed a plan to increase PMS prices and eliminate fuel subsidy. This plan called for a restatement of the government’s commitment to eliminate PMS subsidy in the inaugural speech, deployment of strategic communications to engage stakeholders on the business case for subsidy removal, deployment of non-cash palliatives such as public transport vouchers, education, and health care support, etc. to ease the impact of the subsidy removal on the poor, increase in minimum wage as part of the strategy to cushion the impact of subsidy removal, implementation of  a one-off Personal Income Tax reliefs for low-income earners, increase the refining capacity of Dangote, BUA and NNPCL and implementation of the bullet removal of PMS subsidy. Unfortunately, President Tinubu decreed that “subsidy is gone” during the inaugural speech. The inflationary impact of this statement on the national economy was immediate. PMS prices went up by more than 300% and transportation prices rose. The prices of food and other means of subsistence also increased. Mass hunger followed and the poverty rate rose to 63%.  The total PMS consumption in Nigeria from June 2023 to December 2023 was 10.165 billion litres according to Nigerian Midstream and Downstream Regulatory Authority (NMDPRA) data. The NNPCL claimed a fuel subsidy of ₦3.6 trillion in 2023. The total PMS consumption was 18.816 billion litres in 2024 and NNPCL’s 2024 audited accounts reported ₦8.67 trillion as fuel subsidy (under-recovery) despite government proclamation that fuel subsidy was gone.

The total PMS consumption was 47.6334 billion litres from June 2023 to December 2025. This included 8.414 billion litres of PMS supplied by Dangote Petroleum from September 2024 to December 2025. The NNPCL audited accounts for 2025 is not available and we do not know what the company will claim as ‘under-recovery’. The Dangote refinery supplied over 92 per cent of the petrol consumed in February 2026 as the Nigerian Midstream and Downstream Petroleum Regulatory Authority suspended import licenses. A World Bank report stated that “The Dangote refinery—the main supplier of refined petrol after the regulator ceased issuing import licenses in early 2026—raised the ex-depot price of Premium Motor Spirit to about N1,275 per litre as of March 23, 2026, compared to an estimated import-parity price of around N1,122 per litre, implying a cost differential of roughly 12 per cent,”. The price of imported PMS was less than Dangote’s oligopolistic PMS prices. The World Bank Group advised the Federal Government to allow the importation of petrol into the country. The IMF argued that “allowing qualified marketers to resume imports would restore competition, reduce pricing distortions, and better align domestic prices with global benchmarks. Greater market contestability would also strengthen supply security by reducing reliance on a single refinery and broadening sourcing options while remaining consistent with domestic refining objectives.”  Both Dangote and the PMS importers used the import parity pricing methods in their determination of domestic PMS prices.

The Federal Government argues that any suffering and pain by the poor is a temporary condition imposed on the nation by market forces of supply and demand in the petroleum product market. The poor will benefit when the fuel price is low and only suffer when the fuel price is high. However, in the real world, PMS import parity prices are sticky downwards. PMS rise quickly, like a ‘rocket’, when import prices rise, but fall slowly, like a ‘feather’, when import prices fall. Apart from this, PMS has a fairly inelastic demand in Nigeria. Large changes in PMS prices lead to very small changes in PMS demand. There are very few alternatives to road transport in the movement of goods and persons. Walking is not a viable economic option.

              Nigeria has an estimated population of 243 million in 2026. The World Bank estimate the poverty rate at 63% or 153 million citizens. Most of the poor people are waged and unwaged members of the working class (workers, farmers, women, children and students). The working class only use road and marine transportation to go to their offices, schools, markets, and farms. They do not use railway or airplanes. There are 195000 km of road network in Nigeria. Rural roads make up 68% of the road network while state and federal roads make up 16% each. Only 55% of the road are surfaced. Most of the roads are poorly maintained and are in poor shape. Poor Nigerians use these roads daily, traveling by public/private transport, buses, tricycles, motorcycles etc. All the daily transportation done by 153 million poor Nigerians is PMS dependent. An increase of 11.7% in the PMS price lead to an increase of more than 50% in the prices of transportation prices and 100% in food prices. The price of health, education, rent and all other services also increased as transportation increased. Household goods and clothing cost more. Small businesses that depend on gasoline generators collapse due to high energy costs. Yet, wages and disposable income do not increase immediately or at the same rate.  

Nigerian workers believe that there was no fuel subsidy in the first case. The illusion of an implicit fuel subsidy was created by the use of the wrong pricing method (import parity pricing method) for locally produced commodities in the local market. There was massive corruption in the fuel importation process and raising the pump price to import parity levels did little to remove the corruption. A few of the marketers were tried for corrupt practices. However, the general belief amongst members of the ruling class is that there are little or no consequences for corruption and the theft of public funds so long as one belongs to the political party in power at the Federal level. The myth of fuel subsidy is a scam to cover the corrupt practices of the ruling class. Workers believe that the comparative advantage of a nation is its economic ability to produce a particular good or service at a lower opportunity cost than its trading partners. This is determined by the resources of a nation – capital, land, labour, and raw material. The nation can sell goods and services at a lower price than its competitors. OPEC nations, including Nigeria,  are endowed with large reserves of oil and gas. They have a comparative economic advantage with respect to the production of crude oil and petroleum products. Petroleum products prices should be based on the production cost pricing method domestically in crude oil exporting nations.

The production cost pricing method is the most flexible method and allows the government to manage the national PMS market in the interest of the sustainable economic development of the nation. Furthermore, it encourages the industrialization of the nation and breaks Nigeria from its colonial past of producing raw materials and importing refined goods. The production cost pricing method shows that current PMS prices in the Nigerian PMS market are oligopolistic prices. The use of a production cost pricing model eliminates the need for fuel subsidy and provides the affordable power and energy needed for the rapid industrialization of Nigeria.

The NNPCL needs functional refineries to meet its obligation as the petroleum products supplier of last resort in the nation. The NNPCL needs to repair its four refineries and construct new ones. A policy of national self-sufficiency in petroleum products requires that more refineries should be built. Cheap energy is a necessary condition for the survival of small-scale businesses and the accelerated industrial development of the nation. The production cost pricing method should be used for petroleum products produced from refining the 445,000 barrel per day domestic allocation  reserved for NNPCL local refineries. This will give a PMS pump price between N435/litre and N687 per litre (or $0.33/litre to $0.52/litre at an N1333/$1 exchange rate). A petrol pump price of $0.52/litre will make NNPCL a price setter in the PMS market and permanently break the oligopolistic control of the market by Dangote Petroleum Refinery.

The energy utilization policies of the nation should be worker friendly. Currently, about 51% of Nigerian households use firewood (biomass) for cooking and space heating, 39% use cooking gas and electricity from backup generators and 10% use natural gas. The electricity generation mix consist of 70% from fossil fuel thermal power plants and 21% from Hydropower plants. Solar and other renewable account for less than 9%. A worker friendly energy utilization policy  require that homes and commercial/business offices (including government buildings) should use renewable energy such as solar energy. These energy requirement should be part of the basic building codes. The transport sector should rely on CNG. A CNG market requires the construction of the necessary pipeline infrastructure, a production cost pricing framework and compulsory CNG usage by vehicles owned by MDA and public institutions and companies. Private vehicles can then be encouraged to use CNG in a later phase. Mass urban train systems and city-to-city nationwide railway system are needed for the cost effective national movement of goods and people. Factories and manufacturing/industrial  enterprises should use electric power from gas fired power stations. A decentralized power transmission network is needed. These policies will help Nigeria meet the long time energy needs of the working class.

From a working class perspective, the fight for lower PMS prices in intricately woven with the fight for a living wage. Presently, a full 50-litre tank costs roughly ₦63,250 to ₦70,000. The monthly minimum wage of a worker of N70,000 can only buy  50 litres of petrol. An average worker labors for 3.2 hours to afford one litre of PMS. Persistent insecurity in food-producing regions has disrupted local farming and supply chains. Food inflation is at an all-time high due to the Tinubu administration’s twin neoliberal IMF sponsored anti-people policies of fuel price increase (fuel subsidy removal) and Naira devaluation (exchange rates unification). A pot of rice for a family of 6 cost nearly ₦30,000 or about 43% of the entire monthly minimum wage. Nigerian workers now spend 65% of household income on food, 15% on transport and fuel, 3% on health and education, 15%  on rent and the rest 2%  on services, water, and others. An increase in PMS prices lead to an increase in food, transport and accommodation costs. In 2024, the NLC conducted a national survey of found out that the estimated monthly cost of basic household needs for an average family of six ( two parents and four children) was N650,000. The upcoming minimum wage negotiation would require a demand for a higher basic pay and an automatic cost of living allowance (COLA) adjustment to protect workers from the negative inflationary effects of PMS price increases and Naira devaluation on their real purchasing power. It would require  than a PMS price of less than $0.52/litre based on the production cost pricing method. Furthermore, it would require that workers insist on the repair of the four NNPCL refineries and the passing of anti-trust legislations by the National Assembly. Finally, the fight for a higher COLA indexed monthly minimum wage and lower PMS prices will have to be conducted by workers around the campaign for the 2027 election in order for us to win.

Izielen Agbon

izielenagbon@yahoo.com

Twitter:@izielenagbon