Nigeria Needs Oil Price Buffer to Stabilise Petrol Costs

Nigeria needs a structured mechanism to cushion consumers from sharp increases in global oil prices while addressing the underlying costs of petroleum production and distribution, veteran labour leader and oil and gas practitioner Mustapha Wali has said.

Wali, a former National Vice President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, made the proposal in a policy document titled “Beyond Petroleum Subsidy: A Petroleum Price Moderator and Downstream Transformation Framework for Nigeria.”

The framework proposes the establishment of a petroleum price moderator supported by a ring-fenced stabilisation reserve designed to reduce the impact of exceptional movements in global petroleum prices.

Under the proposal, funds would accumulate in the reserve when international petroleum prices are favourable and be deployed when prices rise beyond predetermined thresholds.

Wali argued that Nigeria’s recurring petrol pricing challenges cannot be sustainably addressed by restoring the previous subsidy system or relying on temporary government interventions whenever pump prices rise sharply.

He described the proposed framework as a counter-cyclical mechanism intended to protect consumers from exceptional price shocks while giving the country time to tackle structural factors responsible for high petroleum costs.

Review of Petroleum Pricing Structure

Beyond establishing a price stabilisation mechanism, Wali called for a forensic review of Nigeria’s existing petroleum pricing template.

The review would examine major cost components across the downstream petroleum value chain, including crude supply, refining, freight, foreign exchange, financing, pipelines, storage, depots, transportation and distribution.

According to him, the process should distinguish unavoidable costs from expenses that are excessive, unnecessary or capable of being reduced through more effective regulation and infrastructure.

He also proposed a predictable crude supply framework for qualified domestic refineries, with clearly defined rules covering allocation, pricing, delivery obligations, quality standards, measurement, dispute resolution and penalties for non-performance.

While locally produced crude would still carry a commercial cost, Wali said supplying domestic refineries could eliminate some freight, handling and logistics expenses associated with imported petroleum products.

Any savings generated through domestic supply, he added, should be transparently reflected in the commercial pricing structure.

Tackling Nigeria’s Petroleum Infrastructure Deficit

Wali identified inadequate petroleum infrastructure as another significant contributor to high downstream costs.

He proposed transforming the Nigerian Pipeline and Storage Company Limited into a professionally managed national petroleum infrastructure operator, with strategic facilities opened to industry participants under transparent and non-discriminatory terms.

The framework also recommends independent technical and commercial assessments of refineries owned by the Nigerian National Petroleum Company Limited to determine which facilities remain economically viable for rehabilitation.

Refineries considered commercially viable could then be opened to partnerships involving competent private investors, international refinery operators, technical companies, infrastructure investors and development finance institutions.

Expanding Private Investment

Wali also called for greater participation by international oil companies and upstream producers in Nigeria’s downstream petroleum industry.

Such participation could include investment in refinery rehabilitation, crude supply arrangements, storage facilities, pipelines, financing, technology and other critical infrastructure.

Under the proposed framework, the stabilisation reserve could eventually play a broader role in financing downstream development.

Once the reserve exceeds an agreed threshold, part of the accumulated funds could be deployed as repayable financing for commercially viable projects, including pipelines, storage facilities, depots, liquefied petroleum gas projects, strategic petroleum reserves, terminals and refinery rehabilitation.

The objective, Wali said, would be to ensure that Nigeria does not simply deploy public resources to lower current petrol prices but also invests in infrastructure capable of reducing petroleum costs over the longer term.

From Import Dependence to Regional Refining Hub

The longer-term ambition of the proposal is to reduce Nigeria’s dependence on imported petroleum products and position the country as a major refining and petroleum supply hub for West Africa.

Achieving that goal would require a combination of predictable petroleum pricing, stronger domestic refining capacity, improved infrastructure and greater private-sector participation.

Wali said the framework was developed as a non-partisan policy proposal and had been circulated to political leaders and national policymakers for consideration ahead of the 2027 elections.

He called for greater focus on sustainable petroleum pricing and downstream industrialisation strategies that go beyond subsidies and temporary interventions.

The proposal ultimately shifts the petroleum pricing debate from short-term price relief towards a broader question of how Nigeria can build the infrastructure, regulatory framework and investment environment required to sustainably lower downstream costs.