Nigeria’s diesel market is showing a widening disconnect between benchmark replacement costs and actual depot selling prices, with some independent marketers and importers now offering Automotive Gas Oil (AGO) below Dangote Refinery’s latest price despite a higher reported landing cost. Checks by Petroleumprice.ng show that while Dangote Refinery reduced its AGO price from ₦1,650/litre to ₦1,570/litre, some private depots subsequently moved their prices to around ₦1,550/litre and below.
The divergence is particularly significant because according to MEMAN the landing cost of imported diesel stands at about ₦1,575/litre, meaning the landing benchmark is already ₦5/litre above Dangote’s ₦1,570/litre price and as much as ₦25/litre above the ₦1,550/litre levels quoted by some depots. This raises a fundamental market question: if an importer or marketer is genuinely replacing product at ₦1,575/litre, what is driving some sellers to offer AGO below that level?
The latest market checks point to an increasingly competitive depot market in which price is no longer determined by landing cost alone. On August 6, Integrated, African Terminal, Duport and Ibachem were quoted at ₦1,565/litre, just ₦5 below Dangote. By the following trading session, Ibeto and Ibachem had moved to ₦1,550/litre, while Ascon, Gulf Treasure and Duport were also quoted at ₦1,550/litre.
The speed of the adjustment is notable. Dangote’s reduction from ₦1,650/litre to ₦1,570/litre effectively reset the market’s reference point, and private depots began cutting prices within 24 hours. The subsequent move below ₦1,570 suggests that some sellers are competing for market share rather than simply passing through their replacement cost.
According to industry sources, speculative pricing by some depot marketers may be contributing to the accelerated decline in AGO prices. The sources told Petroleumprice.ng that some depot representatives are tactically encouraging different importers to lower their offers, creating competitive pressure across the depot market even where underlying replacement costs have not fallen by the same margin. Such behaviour, if sustained, could distort normal price discovery by making depot prices respond faster to competitive positioning than to actual supply costs.
Our correspondent who spoke with depot marketers on condition of anonymity, indicate that some operators are already selling below their effective acquisition or replacement costs as panic selling intensifies. The marketers attributed the situation to aggressive price competition and what they described as manipulation within the depot market, with sellers cutting prices to avoid being left with higher-cost inventory. If the downward pressure continues despite elevated landing costs, industry sources believe it could place further pressure on Dangote Refinery to reduce its AGO price in order to maintain its market position.
This is where the issue of speculative pricing becomes relevant. Depot prices can move ahead of actual supply-cost changes when traders anticipate that competitors, refiners or importers will reduce prices. Once a major supplier cuts its price, other market participants may respond immediately, even where their own underlying replacement cost has not fallen by the same magnitude. Such behaviour can create a downward price race that is driven partly by market expectations rather than fundamentals.
For now, the key issue for the diesel market is whether the current price cuts are being driven by genuine reductions in supply costs or by speculative pricing, panic selling and increasingly aggressive competition among depot marketers. If the latter is sustained, the present price levels could prove difficult to maintain as lower-cost inventories are depleted and sellers begin to replenish at higher replacement values. This could eventually trigger a market correction while placing additional pressure on Dangote Refinery to reassess its AGO pricing in response to the widening gap between depot offers and prevailing supply costs.