Two of Nigeria’s largest oil refiners, NNPC Ltd and Dangote Refinery, have been competing fiercely to control the downstream oil market.
The former, a state-owned oil company, restarted operations at two of its fuel processing facilities late last year. In contrast, the latter, a private company owned by Africa’s richest man, Aliko Dangote, has been making waves with its massive refinery, which began operations early last year.
Over the past three months, both refiners have been engaged in intense fuel price competition, a spree most citizens believe could return the country to the subsidy era when the pump price of petrol was manageable.
However, Dangote Refinery appears to be gaining the upper hand, thanks to its vast refining capacity and strategic pricing structure. The refinery has transformed the country’s fuel supply dynamics, significantly reduced reliance on imports, and altered the previously non-competitive landscape.
This analysis explores how Dangote Refinery is outperforming its major rival, NNPC Limited, in the ongoing price competition, and positioning itself for a significant market share. We will also examine what this means for the industry and consumers.
The petrol price war
Since commencing petrol supplies to the Nigerian market, the Dangote Refinery has pursued an aggressive pricing strategy, disrupting the country’s downstream oil market and sparking stiff competition with NNPC Limited.
Initially, NNPC was the sole offtaker of Dangote Refinery’s products in September 2024, but it soon became the refinery’s biggest competitor.
In September 2024, NNPC lifted over 100 million litres of petrol from Dangote Refinery at NGN898.78 per liter and sold it to marketers at N765.99 per liter, shouldering a significant subsidy of almost N133 per liter.
Although NNPC exercised its right of first refusal as a 7.25% equity investor, the price was determined through a temporary agreement between the refinery and the federal government.
The federal government, which had banned petrol subsidies in May 2023, aimed to ensure a smooth transition for citizens, possibly due to the approaching Yuletide season.
The expiration of this arrangement introduced a new independent price regime, with the mega refinery now in control.
Interestingly, this development has led to a series of price cuts since then between Dangote and NNPC, which eventually restarted fuel production at its Port Harcourt and Warri plants after years of undergoing rehabilitation.
In fact, between November 2024 and March 2025, both Dangote and NNPC have adjusted their petrol prices at least three times, often in response to market movements.
The situation has seen NNPC Limited, which was initially the sole offtaker of Dangote Refinery’s products, now been forced to respond to the refinery’s aggressive pricing strategy.
It has reduced its petrol price several times in recent months, but it still lags behind Dangote Refinery in terms of pricing.
On March 3, 2025 in what appears as retaliation against the last price reduction by Dangote Refinery on April 27, NNPC slashed the pump price of petrol from N945 per litre to N860 per litre in Lagos and N865 in Abuja.
The president of the Petroleum Retailers Outlet Owners Association of Nigeria (PETROAN), Gillis-Harry, during an interview on AriseTV on Monday said the recent petrol price reduction by the Dangote refinery as well as Monday’s cut by NNPC filling stations will help tame inflation.
“This price reduction will be a huge relief to many Nigerians struggling to make ends meet. Lower transportation costs will lead to reduced food prices, making it easier for Nigerians to access affordable food,” he said.
Dangote’s advantage and price strategy
In the price adjustment marathon between Dangote and NNPC, one trend has stood out: Dangote has always been the first to announce adjustments in the ex depot price of fuel.
And each time it does so, the state-owned NNPC and key rival usually follow suit.
The first punch in the price fight seems to have started sometime in December 2024 when NNPC reduced the ex-depot price of its petrol to N899 per litre, barely three days after the Dangote refinery announced a reduction to N899.50 per litre.
That slash by Dangote revealed the potential use of economies of scale by the refinery to offer refined petroleum products at significantly lower prices than that of NNPC, including imported alternatives, a situation analysts say is the competitive impact of deregulation in the downstream sector.
Another factor that seems to be to the advantage of Dangote is the quality of its products. Petrol from the Ada fire refinery has been hailed as the best in the country, meeting the required sulphur levels. There are even reports that the refinery was producing petrol with sulphur levels below the Afri-5 Specification (50 ppm sulphur) allowed by the NMDPRA.
Concerns of unfair competition
The way the competition between NNPC and Dangote is going remains a cause for concern for stakeholders in the country, who warned that the two big dominant players were selling petrol at a loss in Nigeria and could be gradually driving towards oligopoly with their interdependent pricing regime.
They argue that market efficiency is not just about lower prices but also about sustainability, adding that the reliance of NNPC on imported fuel instead of refining locally could undermine its long-term growth.
According to an energy analyst Wunmi Iledare;
“The NNPC is using imported products to compete against Dangote, rather than leveraging its refineries. This approach affects the stability of the exchange market and has unintended consequences for the macroeconomic system.”
Some analysts who spoke to The Guardian said that Dangote reportedly frontloaded sales to clear existing stock.
Just two days ago, Dangote announced it would absorb N16 billion in losses by refunding N65 per litre to marketers, in a bid to ensure that Nigerians benefit from lower fuel prices.
This was confirmed by the National Vice President of IPMAN, Hammed Fashola, who said Dangote has assured marketers, who picked up stock from MRS, Ardova and Heyden within the pricing adjustment period, that they might be refunded.
Commending Dangote for the move and urging Nigerians to be optimistic as government reforms are already yielding results, President of PETROAN, Billy Gillis-Harry said:
“The refund amount is N65 per litre on over 200,000 metric tonnes of PMS purchased by marketers at the old gantry price. Dangote has absorbed a N16 billion loss to implement these refunds, demonstrating its commitment to fair pricing and consumer welfare”, Gillis-Harry said.
“The refund initiative will also positively impact retail outlet owners, who will benefit from reduced prices and refunds. Many retail outlet owners purchased PMS at the higher rate before the price reduction, and the refund will help mitigate their losses. We commend Dangote Refinery for this initiative, which will help reduce the financial burden on our members,” he added.
On the contrary, the President of the Nigerian Economic Society (NES), Prof Adeola Adenikinju, advised against unfair competition, saying the NMDPRA must ensure the viability and efficiency of the market.
“They must determine that no one is trying to drive out competition in the short run to dominate the market. The fair price for petrol products can be determined to see if the price lies within some acceptable range,” Adenikinju said.
Professor of Economics at Babcock University and former President of Chartered Institute of Bankers of Nigeria (CIBN), Segun Ajibola, predicted that fuel prices would drop further once Dangote fully harnesses economies of scale and other private refineries enter the market.
“This is just the beginning. As more private investors start refining locally, fuel prices could return to pre-May 2023 levels in five to ten years,” Ajibola said.
He advised the need for NNPC to adapt to the competitive landscape by improving efficiency and addressing corrupt practices. Also, he commended the federal government for not shielding the state-owned from competition, arguing that the price war ultimately benefits Nigerians at the end of the day.
Dangote Refinery’s aggressive pricing strategy has enabled it to gain a significant market share.
As the refinery continues to produce high-quality petrol at a lower cost, it will keep undercutting its rival NNPC, making it the preferred choice for many marketers and consumers.
Also, the increased local production that this competition fuels helps to further cut the country’s reliance on imported fuel, resulting in significant savings for the government.