1 hour ago
1
Petroleum industry expert, Prof. Wumi Iledare has reacted to complaints by petrol marketers over the rising cost of petrol, saying the situation exposes long-standing structural weaknesses in Nigeria’s downstream sector rather than a failure of deregulation.
Iledare, a professor emeritus and principal facilitator at the Federal University of Petroleum Resources, Energy Business School, disclosed this in a statement to DAILY POST on Monday.
This comes as petroleum marketers recently expressed frustration over the high cost and affordability of petrol following the recent increase in gantry prices by the Dangote Refinery and ex-depot hike.
Reacting, Prof. Iledare said the financial strain being experienced by marketers is a consequence of years of operating under a subsidy regime that masked real market risks.
Iledare explained that deregulation merely uncovered fragilities that already existed within the sector.
“The current financing strain among petrol marketers should not be read as evidence that deregulation has failed; it is evidence that the downstream sector entered a liberalized market structurally undercapitalized.
“For years, the subsidy regime insulated marketers from true market risk. Returns were effectively policy-backed, working capital cycles were cushioned by government payment expectations, and operational discipline around balance sheet strength was secondary. Deregulation did not create fragility— it revealed it.
“What we are seeing now is a classic transition shock. A sector that operated in a quasi-administered market is suddenly exposed to commodity price volatility, exchange rate risk, and commercial credit discipline.
“In such an environment, thin capitalization becomes a binding constraint. Marketers that thrived under subsidy-era cash flows are now competing in a capital-intensive trading market that requires strong liquidity buffers, access to trade finance, and professional risk management. Many were simply not prepared.
“This is not about blame; it is about industrial restructuring. Liberalized markets reward scale, capitalization, and financial sophistication. Some consolidation in the downstream sector is economically inevitable.
“The policy question is not whether to retreat from deregulation, but how to support a transition toward a more resilient market structure: stronger capitalization standards, better access to structured trade finance, credible FX frameworks, and regulatory predictability. A market built on weak balance sheets will always be vulnerable to price shocks.”
Petrol marketers have in recent days lamented the high cost of petrol, linking it to increased ex-depot prices from the Dangote Refinery, a development that has intensified concerns about pump prices and profitability across the downstream value chain.
However, Iledare maintained that the focus of policymakers should be on strengthening market institutions and financial capacity, rather than reversing deregulation, stressing that a sustainable downstream sector must be built on strong balance sheets and predictable regulatory frameworks.
DAILY POST reports that Dangote Refinery and depot owners in Nigeria last week jerked up petrol gantry price, which resulted in a wave of retail fuel price hike nationwide, selling between N839 and N900 per liter in Abuja.
Fuel price hike: Why petrol marketers are lamenting financial strain – Iledare
