CPPE Warns Domestic Refining Alone Won’t Lower Petrol Prices Amid Rising Crude Costs

The Centre for the Promotion of Private Enterprise (CPPE) has cautioned that expanding domestic refining capacity in Nigeria may not be sufficient to significantly reduce petrol prices for consumers, particularly as global crude oil prices surge above $100 per barrel.

The warning was issued in a policy brief on Monday by CPPE’s Chief Executive Officer, Dr. Muda Yusuf, who emphasized the continuing influence of international market dynamics on domestic fuel pricing.

Domestic Refining and Supply Stability

According to CPPE, increasing the capacity of Nigeria’s local refineries can enhance supply stability by reducing the country’s reliance on imported refined petroleum products. Over the past decade, efforts to revive domestic refineries have aimed to address chronic fuel shortages, pipeline vulnerabilities, and logistical challenges that contribute to price fluctuations at the pump.

However, Dr. Yusuf noted that while improved domestic refining could mitigate supply disruptions, it would not insulate consumers from global crude oil price shocks, which remain the dominant factor in determining petrol prices in Nigeria.

Global Oil Prices and Fuel Costs

Fuel prices in Nigeria are heavily linked to international crude oil markets, foreign exchange rates, and import logistics. With crude prices currently exceeding $100 per barrel, the cost of importing refined fuel or crude for refining remains high.

As a result, even if domestic refineries operate at optimal capacity, retail petrol prices are likely to reflect prevailing global market conditions, limiting the impact of local refining on consumer prices.

Policy Implications

The CPPE brief highlights the need for complementary policy measures alongside domestic refining to stabilize and potentially reduce fuel costs. Recommended approaches include:

• Strategic fuel reserves to buffer against price volatility

• Efficient supply chain and distribution infrastructure

• Transparent pricing mechanisms and subsidies targeting vulnerable consumers

• Diversification of energy sources, including renewable and alternative fuels

Dr. Yusuf stressed that a holistic approach is required to ensure that gains from domestic refining translate into tangible benefits for Nigerian motorists.

Looking Ahead

While domestic refining is a critical component of Nigeria’s energy strategy, CPPE’s analysis underscores that fuel prices will continue to be sensitive to global economic trends. Policymakers and investors must therefore balance efforts to boost local production with broader strategies to shield consumers from international market shocks.

For Nigerians, this means that while increased refinery output may improve availability, affordable petrol prices will remain largely tied to the fluctuations of the global crude oil market.