There are wars, and there are wars. Some unfold without a single shot fired, where guns remain holstered and trenches stay undisturbed in silence. Yet, these wars, no less intense, are often marked by the spectacle of combatants huffing and puffing with sounds and furies that, to onlookers, carry undeniable significance. Today, Nigerians find themselves caught in the throes of a petrol price war – a battlefield where two oil giants – Dangote Petroleum Refinery and Nigerian National Petroleum Company Limited (NNPCL) – engage in a contest of pricing strategies, driven by corporate rivalry, that not only ultimately brings benefits to consumers but also significantly alters the pricing landscape of Premium Motor Spirit (PMS).
For years, petrol pricing was largely dictated by government regulations, with subsidies playing a central role in stabilising pump prices. However, the removal of subsidies in 2023 and the subsequent deregulation of the downstream petroleum sector have ushered in a new era of market-driven competition. This competition has sparked an aggressive price war among marketers seeking to capture market share in an environment where consumers are highly sensitive to price fluctuations. Prior to deregulation, the Nigerian National Petroleum Company Limited (NNPCL) was the sole importer of petrol, ensuring uniform pricing across the country. However, with the opening of the market to competition, private importers and independent marketers gained the ability to source products independently and set their prices accordingly. This shift was expected to bring efficiency and market discipline, but it has also led to aggressive pricing strategies as marketers attempt to undercut one another to gain customers.
The competition between the two oil giants, primarily driven by the desire to control a larger share of the market, has led to the downward pressure on prices. Some marketers, particularly independent retailers, who are off-takers of Dangote Petroleum Refinery, have now taken advantage of its competitive pricing. For consumers, the price war presents immediate benefits, the most obvious being lower pump prices. In a country where disposable income is relatively low and petrol is an essential commodity for daily economic activities, any reduction in price provides significant relief. The cost of transportation is a major determinant of overall living expenses, influencing food prices, commuting costs, and the general cost of doing business. When petrol prices drop due to competition among marketers, consumers are expected to experience a corresponding decrease in transportation fares, which has a cascading effect on households’ budgets. Though, this isn’t the case at the moment.
What appears as an attempt by Dangote Petroleum Refinery to even out with the rival NNPCL, in the destructive interplay of power and politics of Nigeria’s petrol economy, may also be driven by the attitudes of consumers who are highly price – sensitive; and who switch between petrol forecourts to take advantage of minor price differences. Given the widespread poverty and economic hardship in the country, many citizens are willing to travel considerable distances to save a few naira per liter. This consumer behavior, which surely fuels the price war, invariably compels oil marketers to keep prices low.
There are dangers that petrol price war poses. While a price war seems beneficial to consumers in the short term, it poses significant dangers to the sustainability of petrol retailing in a free – market economy. The chief danger is the erosion of profit margins for oil.marketers, especially those who lack the financial muscle of major players. This creates a precarious situation where smaller retailers are either driven out of the market, forced to cut corners, or short-change consumers by tampering with the meters at the pumps. Another major danger associated with prolonged price wars is the potential for market distortion. When prices are artificially depressed due to aggressive competition, some retailers may resort to unfair practices, such as product adulteration. In a country where regulatory oversight remains weak, such practices can lead to widespread consumer exploitation such as the sale of adulterated fuel, which damages vehicle engines. A sustained price war increases the likelihood of such malpractices as retailers struggle to maintain profit.
Moreover, the instability caused by price wars can deter investment in the sector. Investors require a predictable and stable pricing environment to make long-term commitments, whether in refining, distribution, or retailing. When the market becomes excessively volatile due to erratic price competition, potential investors may be discouraged from committing capital to new investments. If price instability persists, investors may choose to go elsewhere, ultimately affecting the goal of achieving energy security and reducing dependence on imported fuel.
An unchecked price war can lead to market consolidation, where only the strongest players survive while smaller retailers get pushed out. This creates the possibility of the emergence of a monopoly. The clearest danger is that the emergence of monopoly allows the dominant price fixer to control pricing after eliminating weaker competitors and imposing higher prices in the future. Of course, this will negate the very essence of competition and deregulation, as the ultimate winner in the price war may eventually dictate prices to their advantage, reversing the initial price gains enjoyed by consumers.
The government has a crucial role to play in ensuring that competition in the petrol retail market remains healthy and does not spiral into destructive price wars. While deregulation encourages market-driven pricing, authorities must ensure that competition is fair, ethical, and sustainable. This includes enforcing strict quality control measures, preventing fraudulent practices, anti-competitive behavior that could harm both consumers and retailers in the long term, and promoting transparency in pricing mechanisms.
The ongoing petrol price war may provide immediate benefits to consumers through lower prices, its long-term implications must be carefully considered. The sustainability of the downstream sector depends on a balance between competition and profit. If the price war continues unchecked, it could lead to market instability and the volatility that comes with it. Finally, I return to the opening paragraph to conclude this piece. There are wars, and there are wars. Some are waged with fire and steel, while others play out in boardrooms and marketplaces, shaping the lives of millions without a single shot fired. The ongoing petrol price war in Nigeria is one of such battles – an economic duel where two oil giants, locked in fierce competition, deploy pricing strategies as their weapons. Yet, in this contest of corporate strength, the real victors are the consumers, who, for once, find relief in a market where prices bend to their favour. However, as history has shown, price wars are seldom permanent. The same forces that drive competition can just as easily conspire to restore old pricing structures, often at the consumer’s expense. Nigerians must therefore remain vigilant, understanding that while they may reap the short-term benefits of this corporate rivalry, true economic relief lies in policies and reforms that foster lasting market efficiency and transparency. No more.
