The removal of fuel subsidy by President Bola Tinubu on May 29, 2023, has led to a significant increase in the price of Premium Motor Spirit (PMS) in Nigeria. The price of PMS jumped from below N200 per liter to about N800 per liter in a matter of hours. Since then, the price has been fluctuating, largely reflecting the movement of crude oil prices in the international market. As of mid-September 2026, the price of PMS has almost hit N1500 per liter.
The continuous fluctuation in PMS prices has been disrupting and distorting the economy, particularly in the three-year economic reform efforts of the President Bola Ahmed Tinubu administration. Each time the price of petrol rises, it automatically pushes up the cost of transportation, prices of food items, and other daily needs of the citizenry. This drives up the headline inflation, measured by the consumer price index (CPI), which hit 34.85 percent at the end of December 2024.
Despite the National Bureau of Statistics (NBS) reporting a consistent decline in the rate of inflation, the reality in the marketplace suggests otherwise. Prices of practically everything are sky high, and the purchasing power of consumers continues to weaken due to higher inflation rates. The situation has been exacerbated by Nigeria's reliance on imported PMS and other refined products, despite being a major oil-producing country.
The Dangote Refinery, which commenced operations in 2024 and has the capacity to satisfy Nigeria's domestic PMS needs, has not been able to completely halt petrol importation. The US-Iran war has also contributed to the current high prices of PMS, exposing Nigeria to the vagaries and headwinds of spiking imported PMS prices. As a result, it has become increasingly difficult for the CPI to reflect the true state of Nigerians' consumer purchasing power.
The government has been criticized for not doing enough to ensure a viable and competitive local refining industry. Instead of encouraging local refining, the government has issued more licenses to import PMS, stifling private sector efforts to establish local refining companies. The Dangote Refinery has faced challenges, including being forced to import crude oil from foreign countries.
Recently, President Tinubu announced plans to repair the four giant state-owned refineries, which have been moribund for over two decades. However, no definite timeline was given, and it remains to be seen whether this initiative will stabilize the wavy PMS price movement. A viable and competitive local refining industry would help reduce Nigeria's reliance on imported PMS and mitigate the effects of imported inflation.
The current situation has resulted in a deepening cost-of-living crisis, with millions of people sunk into absolute poverty in the past three years. The failure of government policies and initiatives aimed at alleviating the pervading hardship has further exacerbated the situation. The government faces the challenge of addressing the root causes of the crisis and finding a lasting solution to the fuel price volatility and its attendant effects on the economy.
Key points
- The removal of fuel subsidy has led to a significant increase in PMS prices, contributing to a deepening cost-of-living crisis in Nigeria.
- Nigeria's reliance on imported PMS and other refined products has made it vulnerable to fluctuations in international market prices.
- A viable and competitive local refining industry could help stabilize PMS prices and mitigate the effects of imported inflation.
