Abayomi TJ Ishola
The petrol station attendant returned the nozzle to its holder and announced the price. The motorist stared at him as though he had just confessed to a crime.
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He looked at the pump. Then at his car. Then, perhaps, at the oil beneath the Niger Delta.
Nigeria produces crude oil. Nigeria now has one of the largest single-train refineries in the world. Nigeria has spent decades telling its citizens that the answer to expensive imported petrol was to refine our own crude.
Yet here we are, with petrol around ₦1,400 a litre in Lagos and Abuja and as much as ₦1,500 in parts of the North.
So the question is no longer simply: Why is petrol expensive in an oil-producing country?
The more uncomfortable question is: what exactly has Nigeria’s oil done for the Nigerian at the filling station?
This is where Nigeria’s petroleum paradox becomes almost philosophical. We have oil beneath our feet, petrol in our veins and yet an economy that behaves as though energy is a foreign luxury.
The answer is not as simple as saying that the government should reduce the price. Nor is it enough to resurrect the old petrol subsidy and pretend that the past did not happen.
The old subsidy regime was unsustainable. It consumed enormous public resources, distorted the market and created opportunities for fraud and rent-seeking. The removal of the subsidy in 2023 was therefore not merely a political inconvenience; it was an acknowledgement that Nigeria could not indefinitely borrow from tomorrow to make petrol artificially cheap today.
But removing a bad subsidy does not automatically create a good energy policy.
That is the mistake Nigeria must avoid.
The country has moved from one extreme to another: from a system in which government absorbed much of the cost of petrol to one in which consumers absorb much of the international price shock.
Neither is a satisfactory long-term settlement.
The real question is how Nigeria can create a petroleum system in which the market works, producers and refiners have incentives to invest, government finances remain sustainable and ordinary Nigerians receive some tangible benefit from the resource beneath their feet.
That requires a new Nigerian petroleum bargain.
For decades, Nigeria performed the peculiar economic trick of exporting crude and importing the petrol made from crude. We sold the raw material and bought back the finished product, paying for shipping, insurance, foreign exchange, refining and distribution along the way.
Then we subsidised the imported product.
It was almost as if a farmer exported his cassava, bought garri from abroad and then borrowed money to subsidise the garri.
The Dangote refinery has changed an important part of this equation. Its enormous capacity means Nigeria finally has the industrial infrastructure to process a substantial proportion of its own petroleum domestically.
But the refinery has also exposed a deeper problem.
A refinery can solve a refining problem. It cannot, by itself, solve a national energy-pricing problem.
Crude remains internationally traded. The naira remains vulnerable to exchange-rate movements. Refining has costs. Transportation has costs. Storage has costs. And when international oil prices rise, the economic value of crude rises with them.
This explains the extraordinary situation in which Nigeria can refine its own petrol and still find itself vulnerable to global oil-price shocks.
Recent increases have demonstrated precisely that. Even with the Dangote refinery operating at full capacity, petrol prices have climbed sharply as international crude and refined-product prices have risen.
So Nigeria has solved one problem without solving the problem underneath it.
The country needs to decide what proportion of the value of Nigerian petroleum should remain exposed to the global market and what proportion should be deliberately converted into a domestic economic advantage.
The first step should be a transparent domestic crude supply and pricing mechanism.
Nigeria already has a Domestic Crude Supply Obligation under the Petroleum Industry Act. It requires producers to make crude available to domestic refineries. The problem has historically been implementation and pricing.
That is beginning to improve. Nigerian Upstream Petroleum Regulatory Commission, NUPRC, reported that domestic refiners received 53.7 million barrels in the second quarter of 2026, representing 97.4 per cent performance against the domestic supply obligation.
The lesson is obvious: when government creates a rule and actually enforces it, the industry can respond.
But Nigeria should go further.
A Nigerian refinery should not have to behave as though every barrel of Nigerian crude destined for domestic consumption is simply another barrel being auctioned into the international market.
Nor should producers be forced to sell at an arbitrary politically determined price.
The answer is a transparent domestic crude-pricing formula.
Take the relevant international benchmark. Deduct legitimate costs that would have been incurred in exporting the crude. Add a reasonable domestic supply adjustment. Publish the formula. Audit it independently.
Let the producer make money.
Let the refinery make money.
But let the Nigerian economy also capture the benefit of not importing the finished product.
The argument should not be about whether one company or another wins the pricing dispute.
The argument should be about whether Nigeria wins.
And this brings us to the reform Nigeria has so far been unwilling to discuss honestly: what should happen when global petroleum prices rise sharply?
The answer should not be another permanent subsidy.
It should be a Petroleum Price Stabilisation Fund.
The principle is simple.
When oil prices are exceptionally high, Nigeria receives additional petroleum revenue. A clearly defined proportion of that exceptional revenue should go into a professionally and independently managed stabilisation fund.
When international oil prices subsequently surge to a level capable of causing severe domestic inflation, the fund temporarily cushions the domestic petroleum price.
When prices fall, the fund rebuilds.
This would not be the old subsidy wearing a new agbada.
The distinction is crucial.
The government would not promise Nigerians permanently cheap petrol. It would promise them some protection against extraordinary petroleum-price shocks when Nigeria itself is earning extraordinary petroleum income.
That is a much more defensible social contract.
And there should be no room for the Nigerian genius of turning a sensible idea into another feeding trough.
Every naira entering the fund should be published. Every naira leaving it should be published.
The pricing formula should be automatic rather than subject to ministerial discretion.
The fund should be independently audited.
The National Assembly should scrutinise it.
And Nigerians should be able to see, preferably online and in real time, how much is in it and why money is being released.
Nigeria has never suffered from a shortage of committees. We have suffered from a shortage of mechanisms that Nigerians can see working.
But stabilising petrol prices is only half the solution.
The more profound reform is to reduce Nigeria’s dependence on petrol itself. This is where our energy debate has been too narrow.
Every time Nigerians ask for cheaper petrol, they are really asking for cheaper movement, cheaper food, cheaper electricity and cheaper production.
Petrol is merely the messenger.
Unfortunately, we keep trying to beat the messenger.
Nigeria needs to move from a petrol economy to an energy economy.
We have enormous natural gas reserves. Gas should power more electricity generation, industry, fertiliser production and appropriate forms of transportation.
A factory with reliable and affordable gas or electricity does not need to generate its own expensive power with diesel.
A bus running efficiently on an alternative domestic energy source is less exposed to petrol-price shocks.
A functioning mass-transit system means millions of Nigerians do not have to buy petrol simply to travel to work.
A reliable railway system reduces the amount of diesel and petrol required to move people and goods.
This is why the real Nigerian energy policy should not be:
How do we make petrol cheap?
It should be:
How do we make energy, transportation and production cheap?
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There is an important distinction.
Cheap petrol can encourage waste, congestion and smuggling.
Cheap and reliable energy can increase productivity.
That is the transformation Nigeria should pursue.
And then there is competition.
Nigeria must not make the mistake of replacing a government-controlled petroleum system with a private monopoly.
The Dangote refinery is an extraordinary industrial achievement. Nigeria needs more of that ambition, not less.
But the solution to state inefficiency is not private domination.
Nigeria needs several viable refineries, reliable domestic crude supply, transparent regulation and competition.
The Port Harcourt refinery and other existing facilities should become commercially meaningful where technically and economically viable. Modular refineries should have a place where they make economic sense. Importers should remain available as a supply safety valve when domestic production cannot meet demand.
But imports should not remain the default simply because somebody has become accustomed to importing.
If Nigerian refined petrol is cheaper than imported petrol, domestic supply should logically receive priority.
The pricing chain should also be opened to public scrutiny.
If a litre of petrol sells for ₦1,400, Nigerians should be able to see the broad components:
crude cost + refining cost + financing + storage + transportation + distribution + taxes + margins = pump price.
Why should this be a state secret?
If somebody is making a legitimate profit, show it.
If government is collecting a legitimate tax, show it.
If logistics are expensive, show the cost.
If the naira is responsible for part of the increase, explain it.
Transparency will not make petrol cheaper by itself. But it will make it harder to make Nigerians pay for costs that do not exist.
There is another elephant sitting beside the filling station: smuggling.
Nigeria cannot create cheap petrol for 200 million Nigerians while inadvertently creating a business opportunity for millions of litres to cross the border.
If Nigerian petrol becomes significantly cheaper than fuel in neighbouring countries, arbitrage will follow.
This requires stronger border controls, digital tracking of petroleum movement, metering at depots and better regional coordination.
But again, the answer should not simply be to increase the price for Nigerians because someone is smuggling it.
The answer is to make the system itself harder to exploit.
Ultimately, however, all of this comes down to one question:
Who owns the benefit of Nigerian petroleum?
Technically, petroleum belongs to the Nigerian state. Economically, its benefits have often been captured by a complicated chain of governments, contractors, traders, importers, producers, refiners and intermediaries.
The Nigerian citizen frequently appears at the end of that chain, holding the bill.
That arrangement must change.
Nigeria should treat petroleum not merely as government revenue but as national capital.
An oil barrel extracted today cannot be extracted again tomorrow.
If its entire value is consumed through salaries, imported goods, recurrent expenditure and political patronage, the barrel disappears.
If part of its value is converted into refineries, electricity, railways, gas pipelines, mass transit, industrial infrastructure, sovereign savings and human capital, the barrel continues working after the petrol has been burnt.
That is the deeper lesson Nigeria should learn from successful petroleum-producing countries.
Some have chosen to distribute petroleum wealth through relatively cheap domestic energy.
Others have captured petroleum rents through taxation and state participation and invested the proceeds.
Nigeria needs to find its own version.
But it must stop pretending that the only choices are subsidy or market price.
There is a third possibility:
a functioning market with a national dividend.
Let petrol have a market price.
Let producers and refiners make reasonable returns.
Let competition determine efficiency.
Let the government stop pretending that it can permanently defeat global oil economics.
But when Nigeria earns extraordinary petroleum revenues, a defined portion should return to Nigerians through energy-price stabilisation and investment in the infrastructure that lowers energy costs.
That is the new bargain.
I would therefore urge the Federal Government to establish a National Energy Affordability Framework built around five pillars.
First: domestic crude priority. Nigerian refineries should have guaranteed access to Nigerian crude under a transparent, independently audited pricing formula.
Second: a Petroleum Price Stabilisation Fund. Exceptional petroleum revenues should partly accumulate during periods of high oil prices and be used automatically to cushion extraordinary domestic price shocks.
Third: competitive refining. No state or private company should be allowed to become the unquestioned gatekeeper of Nigeria’s fuel supply. Domestic refining should compete on price, quality and reliability.
Fourth: energy substitution. Accelerate investment in gas, electricity, rail and mass transit so that Nigerians gradually need less petrol to live, work and move.
Fifth: convert oil wealth into permanent national assets. A defined proportion of exceptional petroleum revenue should be invested rather than consumed.
This is how Nigeria can preserve the essential achievement of subsidy reform without abandoning citizens to every movement in the international oil market.
The first phase of petroleum reform was about removing the subsidy.
The second phase must be about making subsidy unnecessary.
That means creating an energy system efficient enough to compete, transparent enough to command public trust and productive enough to reduce the cost of living.
Nigeria cannot control the price of oil in the Middle East.
It cannot control every movement of the dollar.
It cannot prevent a war from disrupting global energy markets.
But it can control whether Nigerian crude reaches Nigerian refineries.
It can control how transparently domestic fuel is priced.
It can decide what happens to petroleum windfalls.
It can expand gas and electricity.
It can build mass transportation.
And it can decide whether the oil beneath Nigerian soil remains a blessing on paper or becomes a productive asset for the people above it.
After more than six decades of petroleum production, Nigerians should no longer be asking why an oil-producing country has expensive petrol.
The more fundamental question is this:
If the oil beneath our feet cannot make energy affordable, industries competitive and transportation cheaper, what exactly have we been producing all these years?
Perhaps the time has come for Nigeria to stop measuring the success of its petroleum industry by how many barrels it pumps out of the ground.
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Perhaps we should begin measuring it by how much prosperity remains after the barrel has been pumped.
You may contact TJ at isholaabayomi@yahoo.co.uk