The fuel subsidy era is over. Since Nigeria scrapped its petrol subsidy in 2023, Nigerians have been paying full cost at the pump with prices jumping from ₦200 to as high as ₦800 per litre. For many, it’s a bitter pill. But beyond the outrage lies a bigger question: where exactly does your money go when you buy a litre of petrol in today’s deregulated market?
In this special report, we break down the petrol pricing structure in a post-subsidy Nigeria and explain how each player from oil producers to roadside filling stations gets a share of your hard-earned cash.
The End of Subsidy, and the Rise in Prices
For decades, the Nigerian government shielded citizens from global oil price shocks by absorbing part of the cost of petrol through subsidies. It worked until it didn’t.
By 2022, subsidy payments had ballooned to over ₦4 trillion annually, draining public coffers and fuelling corruption. The Bola Tinubu administration, like previous regimes, promised reforms. In mid-2023, the government finally bit the bullet, announcing the complete deregulation of petrol prices.
The impact was immediate. Petrol prices shot up, and Nigerians have been adjusting ever since.
But what exactly makes up the cost of a litre of petrol in the new era?
The Price Structure: Anatomy of a Litre
As of June 2025, a litre of petrol averages above ₦800 at the pump. This figure is not arbitrary it reflects a complicated chain of global and local inputs. Here’s how it breaks down:
1. Crude Oil (₦280–₦350 / 40–50%)
Even though Nigeria is an oil-producing country, it imports the bulk of its refined petroleum due to insufficient local refining. That means the crude cost is pegged to international benchmarks like Brent, which currently trades between $67 and $68 per barrel.
Refiners foreign or domestic buy crude at these prices. The cost is then passed on to marketers, who factor it into the final retail price.
2. Refining (₦70–₦105 / 10–15%)
Crude oil must be refined before it becomes petrol. Nigerian petrol is still mostly imported, even though the 650,000bpd Dangote Refinery began limited operations in late 2024.
Until the refinery reaches full capacity and scales production, international refiners in the Netherlands, India, and the UAE continue to supply Nigeria charging margins that reflect their processing and operational costs.
3. Freight and Logistics (₦35–₦70 / 5–10%)
Getting petrol from refineries abroad to Nigerian ports, and then to filling stations across the country, adds substantial cost.
Shipping rates fluctuate due to global supply chain pressures, such as those caused by disruptions in the Red Sea and Suez Canal. Once the fuel lands in Nigeria, additional costs storage at tank farms, trucking to retail points, insurance, and demurrage charges are layered on.
Nigeria’s poor road infrastructure and overreliance on diesel-fuelled trucks make matters worse.
4. Taxes and Levies (₦70–₦140 / 10–20%)
Petrol, even without subsidy, is still a revenue stream for government. Taxes include:
- VAT (when applicable)
- Customs duties
- NMDPRA regulatory fees (as established under the Petroleum Industry Act)
- Storage and distribution levies
Although the government sometimes waives VAT to ease public pressure, other statutory fees remain intact. And in some cases, states may add their own levies for haulage and retail licensing.
5. Distribution and Retail Margins (₦70–₦105 / 10–15%)
The Nigerian downstream sector is made up of major marketers like TotalEnergies, NNPCL Retail, Ardova, and a host of independent marketers.
These entities add their own margins to cover warehousing, staffing, and station operations. Retailers typically earn 5–7%, while distributors earn slightly more due to transport logistics and storage overheads.
But inefficiencies and profiteering in the distribution chain often lead to even higher prices, particularly in remote states.
6. Currency Risk (Up to 30%)
Perhaps the most punishing factor is the exchange rate. Since deregulation, the naira has plunged from ₦460/$ in 2023 to around ₦1,600/$ in 2025.
Because petrol imports are priced in dollars, a weaker naira inflates costs across all segments crude, freight, refining, and even equipment maintenance. In essence, Nigerians now pay a premium for a volatile currency, not just for oil.
The Economic Fallout
Fueling Inflation
The hike in petrol prices has cascaded through the economy. Transportation, food, and electricity costs have soared. As of May 2025, inflation in Nigeria hit 34.2%, its highest in two decades.
Reduced Fiscal Burden
Still, the government argues that subsidy removal has freed up funds. The Finance Ministry reported savings of over ₦2 trillion in 2024. Yet Nigerians say they see little to show for it in roads, health, or education.
Refinery Hopes
The Dangote Refinery remains the big bet. If it ramps up to full capacity and begins local distribution, it could eliminate much of the freight, refining, and forex costs. But the timeline remains unclear, and imported petrol continues to dominate.
Social Impact: The People Pay the Price
For low-income Nigerians, the subsidy removal has been devastating. Public transport fares have doubled in some cities, and many families now ration their use of generators and gas cookers.
In rural areas, where there’s no reliable grid power or public transit, the impact is even more severe.
Unions have protested. Workers have gone on strike. And public trust in the government’s handling of the transition is waning.
A Transparent Breakdown: Where ₦700 Goes
Let’s put this into perspective:
| Component | Share | Cost (₦) |
|---|---|---|
| Crude Oil | 40–50% | ₦280–₦350 |
| Refining | 10–15% | ₦70–₦105 |
| Freight & Logistics | 5–10% | ₦35–₦70 |
| Taxes & Levies | 10–20% | ₦70–₦140 |
| Distribution & Retail | 10–15% | ₦70–₦105 |
| Exchange Rate Effect | Variable (20–30%) | Embedded |
Where Do We Go From Here?
Policy Recommendations:
- Refinery Optimisation:
Fast-tracking full operations at Dangote and modular refineries can cut import costs drastically. - Strengthen Infrastructure:
Restoring pipelines and investing in inland depots can reduce overdependence on diesel-fuelled trucking. - Exchange Rate Stability:
A stable naira, driven by coherent forex policies, will directly lower petrol costs. - Targeted Relief:
Instead of blanket subsidies, the government can introduce transport vouchers or direct cash transfers to vulnerable groups. - Public Accountability:
Nigerians want to see where subsidy savings are going. Without transparency, the reforms risk public rejection.
Final Thoughts
In this new era of full deregulation, every litre of petrol carries the weight of global oil markets, local infrastructure gaps, forex woes, and government policies. Understanding where your money goes is no longer a luxury it’s a necessity.
Until domestic refining kicks in fully and forex stabilises, Nigerians will continue to feel the burn at the pump. But with transparency, smart investments, and honest engagement, there’s a path forward one litre at a time.
