Right of Reply: Crude at $72, Petrol at ₦1,075: Why Dangote Refinery Must Publish Its Pricing Methodology

By Nick Agule

I appreciate the robust defence of Dangote Refinery by the representative during the right of reply on Arise News. We agree on one fundamental point: Nigeria’s hydrocarbon economy has been poorly managed for decades, and Dangote Refinery is a transformational investment that has significantly improved our energy security. I have consistently acknowledged this.

However, my concern was never whether Dangote Refinery should make a profit. My concern is whether Nigerians are paying a fair price in a market where one refinery has overwhelming pricing power.

Ironically, the Dangote Refinery representative reinforced my argument. He acknowledged that the refinery does not reduce petroleum product prices as quickly when crude oil prices fall, as they dramatically increase when crude prices rise. He attributed this asymmetry to the phenomenon economists call downward price stickiness (which he termed as the sticky downward paradox) or the “rockets (price rises) and feathers (price falls)” effect.

The representative repeatedly questioned where I obtained my pricing template. The answer is straightforward. I did not claim to possess Dangote Refinery’s internal pricing model. I relied on three pricing methodologies  the NNPCL pricing template, Dangote refinery’s gantry price pre-war and the gross revenue the refinery earns on average from 159 litres of refined products from a barrel of crude to estimate Dangote refinery’s economics. These models incorporate crude oil prices, refining yields, operating costs, financing costs, exchange rates, logistics and reasonable profit margins.

If Dangote Refinery believes those independent estimates are materially inaccurate, the solution is not to ridicule the analysis but to publish its own high-level pricing methodology. Transparency ends speculation.

The Missing Pricing Template

The very first question posed to the representative was simple:

Can Dangote Refinery share its pricing template?

The question was never answered.

Transparency does not require disclosing commercially sensitive contracts, only enough information to show that prices reflect genuine costs rather than market power.

The question is simple: if crude was about $72 per barrel before the war and Dangote’s gantry price was ₦774 per litre, why is the gantry price still ₦1,075 after crude had returned to the same $72 for over two months? All the cost factors cited by the refinery – crude premium, freight, financing, demurrage and logistics – also existed before the war. What, then, justifies the additional ₦300 per litre?

Inventory Explains Delays, Not Permanent High Prices

The representative explained that petrol sold today may have been refined from crude purchased months earlier at about $95 per barrel, with freight, demurrage, financing costs and storage increasing the effective cost to perhaps $130–135 per barrel before refining.

That explanation is entirely reasonable for a temporary period.

By The representative’s own admission, the refinery held one to two months’ inventory purchased before the war, when Brent crude was about $72 per barrel. Yet, just ten days after the conflict began, Dangote increased its gantry price to ₦1,275 per litre, even though it was still refining and selling petrol produced from the lower-cost crude already in stock. That inevitably generated windfall profits.

By the same logic, when crude prices fell, those gains should have enabled the refinery to reduce prices within a similar timeframe. Instead, more than two months later, the gantry price has yet to return to its pre-war level.

Local Refining Must Deliver Local Benefits

The representative rightly observed that refinery economics are more complicated than simply multiplying the Brent crude price by 159 litres.

I agree.

But complexity should not become an excuse for opacity. Nigeria invested in local refining to reduce dependence on imported petroleum products. Domestic refining eliminates or substantially reduces costs associated with imports, including international freight, marine insurance, foreign port charges, demurrage and several import logistics expenses.

If local refining does not ultimately translate into measurable savings for Nigerian consumers, then one of its principal economic benefits is lost.

Competition Matters

The representative challenged those who describe Dangote Refinery as enjoying monopoly power, suggesting the word should be removed from our vocabulary.

Yet, in the same interview, he acknowledged that government-owned refineries are effectively technically dead and that Dangote Refinery is currently the only functioning large-scale refinery capable of meeting domestic demand. That is precisely why the issue of market dominance arises.

Monopoly is not defined by ownership or intention; it is defined by market structure and pricing power.

Where effective competition is absent, consumers naturally demand greater transparency because market forces alone cannot discipline prices.

This is why comparisons with pharmaceuticals and food are misplaced.

The pharmaceutical and food industries consist of numerous competing producers and importers. Consumers dissatisfied with one supplier can switch to another. That competitive pressure constrains pricing.

Nigeria’s PMS market does not currently enjoy the same degree of competition.

Sticky Downward Pricing Must Work Both Ways

The representative’s analysis convincingly explains why prices can increase when refinery input costs rise.

It does not convincingly explain why price reductions lag even after crude prices decline substantially.

If crude purchased at $95 justifies today’s price, then crude purchased tomorrow at $72 should eventually justify lower prices.

Pricing discipline cannot operate in only one direction.

Where We Agree – the Incompetence of the NNPCL

I fully agree with the representative that the decades-long approach of NNPCL towards refinery rehabilitation has been a costly exercise in chasing shadows. On this point, we stand together.

Nigeria should never have become dependent on imported petroleum products despite being a major crude oil producer.

The President should issue an Executive Order removing the four state-owned refineries from the NNPCL and transferring them either to the Bureau of Public Enterprises for outright privatisation or to the Infrastructure Concession Regulatory Commission for a transparent public-private partnership.

The opaque and secretive process adopted by the NNPCL in selecting two Chinese companies inspires little confidence and is unlikely to deliver a sustainable solution.

The Real Issue

This debate is not about attacking Dangote Refinery.

It is not about denying the refinery a reasonable commercial return.

Nor is it about questioning the enormous contribution the refinery has made to Nigeria’s energy security.

The issue is far simpler.

A refinery that dominates a strategic market owes consumers a reasonable degree of transparency.

If independent analysts estimate that petrol should retail below ₦800 per litre at a Brent crude price of approximately $72 per barrel, and the refinery believes otherwise, then the most effective response is not to question where the analysis came from.

It is to demonstrate, through a transparent pricing methodology, why the analysis is wrong.

Until that happens, independent economic analysis will remain not only legitimate but necessary.

Transparency is not the enemy of business.

Transparency is the foundation of public trust.

I agree that inventory costs can delay price reductions. But inventory is not permanent. Every refinery eventually replaces expensive crude with cheaper crude. The real question is: At what point does the lower replacement cost feed through to Nigerians?

Without a transparent pricing methodology, the public cannot distinguish between legitimate inventory effects and excessive pricing.

Note: These interviews were conducted when Brent was $72. The price has since risen to $87 today due to the escalating conflict in Iran.

Nick Agule (nick.agule@yahoo.co.uk) is an energy expert and can be reached on; nick.agule@yahoo.co.uk