The Petroleum Industry Act (PIA) 2021 has changed the rules of the game in Nigeria’s oil and gas industry especially in the downstream sector. While many Nigerians now accept that fuel prices are no longer “fixed” by government agencies, few understand the deeper forces at work behind today’s volatile petrol prices.
In this exclusive feature, we unpack five lesser-known truths about how the PIA shapes the cost of petrol in your local filling station—from Lagos to Kano, Port Harcourt to Sokoto.
1. The Government No Longer Sets Prices, Marketers Do
One of the most misunderstood facts is that fuel pricing is now completely deregulated. Under Sections 205 to 208 of the PIA, the Federal Government stepped back from price-fixing. Today, marketers determine petrol prices based on their actual costs and this includes everything from international crude rates to local transportation fees.
What this means is simple: no more uniform pump price across the country. Marketers now consider factors like:
- Landing cost
- FX rate (naira to dollar)
- Depot charges
- Transport to filling stations
- Profit margin
So when you see different prices across depots say ₦880 in Lagos and ₦930 in Calabar it’s not sabotage or corruption; it’s exactly what the PIA allows. The law lets the market lead the way.
2. The PIA Effectively Bans Blanket Subsidies
This is where things get more sensitive. While subsidy payments were once a cornerstone of Nigeria’s fuel pricing system, the PIA changed that completely. The law supports full cost recovery meaning fuel should be sold at its true cost, with no government discounts.
Unless a new law or targeted intervention is passed, blanket petrol subsidies are now illegal under a deregulated market. The PIA allows for targeted social interventions for example, transport vouchers or subsidies for low-income groups but not direct price cuts for everyone at the pump.
So when global oil prices rise or the naira weakens, the government cannot legally interfere to slash prices, unless it reintroduces a subsidy framework through proper legislation.
3. NMDPRA Regulates, It Doesn’t Dictate Price
Let’s clear up another misconception. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) is not a pricing board. According to the PIA, its job is to monitor and regulate, not to dictate price.
NMDPRA publishes reference prices (guides) to help market players align with current realities, but it does not impose a cap or floor on retail pump prices. Its mandate under the PIA includes:
- Ensuring transparent pricing structures
- Preventing collusion and price-fixing
- Encouraging competition among marketers
- Watching for supply manipulation or abuse
So while you may see PMS reference prices from NMDPRA every few weeks, those figures are advisory, not enforceable.
4. Petrol Prices Now Rise or Fall with the Naira and Global Oil
The PIA fully adopts a market-reflective pricing system, also known as import parity pricing. Even though Nigeria now produces petrol locally (thanks to the Dangote Refinery), the pricing model still uses international benchmarks. Why? Because oil remains a globally priced commodity even when refined locally.
So, what exactly influences pump prices now?
- Brent crude price: If oil hits $90 per barrel, expect local pump prices to jump.
- Exchange rate: A weak naira means higher PMS cost in naira termseven for local refineries.
- Freight and port charges: Even local producers must transport fuel to depots, adding cost.
- Depot pricing strategy: Each depot sets its own ex-depot price based on operations and margin targets.
For example, Dangote’s PMS recently moved from ₦838 to ₦880 per litre despite being locally refined. That’s the PIA in action: free market, free pricing.
5. The PIA Encourages Open Competition but Watches for Monopolies
This is the least discussed, but perhaps the most important truth. While the PIA supports deregulation and open market pricing, it also includes clauses to prevent market capture or dominance by any single operator.
With Dangote Refinery now producing the bulk of Nigeria’s fuel, stakeholders have raised concerns about possible price manipulation or anti-competitive behaviour.
Thankfully, Section 227 of the PIA empowers regulators to investigate and punish:
- Price collusion
- Abuse of dominant position
- Cartel formation
- Anti-competitive mergers or practices
So, while Dangote has pricing freedom, it doesn’t have pricing impunity. If any marketer, importer, or refiner tries to corner the market or force out smaller players, NMDPRA and FCCPC are legally bound to step in.
What It Means for You
The price of petrol in Nigeria today is no longer a product of presidential announcements or NNPC memos. It is driven by market dynamics supply, demand, cost, and profit margins—as allowed by the PIA.
The Petroleum Industry Act has taken fuel pricing out of politics and placed it firmly in the hands of economics. But with that freedom comes responsibility for regulators, marketers, and policymakers alike.
As Nigerians face higher fuel prices, what’s needed is not a reversal of deregulation, but targeted support for the vulnerable and strong regulatory enforcement to keep the market honest.
