Publicly quoted fuel marketing companies recorded a sharp decline in profitability in 2025, with earnings indicators falling by between 60 and 70 per cent, highlighting the growing challenges in Nigeria’s rapidly transforming downstream petroleum sector.

This was disclosed in the Nigeria Energy Downstream Industry Report 2025, which noted that the sector, despite undergoing a historic transition driven by local refining and full deregulation, is facing intense financial pressure from competition, rising costs, and market volatility.

According to the report published by the Major Energies Marketers Association of Nigeria and obtained by our correspondent on Monday, “publicly quoted downstream fuel marketers reported sharp declines in profitability, with earnings indicators dropping by an average of roughly 60–70 per cent from the prior year.”

It attributed the development to “intense price competition, depressed marketing margins, rising borrowing costs, and higher logistics and operating expenses, which collectively placed significant pressure on marketers’ financial performance.”

The report, themed “Resilience and Transformation: Nigeria’s Downstream Sector in the Era of Local Refining”, provides a comprehensive assessment of the industry’s shift from an import-dependent system to a refinery-driven supply chain.

It noted that the commencement and scale-up of operations at the Dangote Petroleum Refinery marked a turning point in the country’s petroleum value chain, fundamentally altering supply dynamics.

“In 2025, Nigeria’s downstream petroleum sector demonstrated a remarkable structural transformation, driven primarily by the continued integration of domestic refining capacity with broader market deregulation. The operational expansion of the Dangote Petroleum Refinery marked a turning point in Nigeria’s petroleum value chain, significantly altering domestic supply dynamics.

“Local refining capacity increasingly displaced imported refined products, easing long-standing supply bottlenecks, reducing exposure to international product markets, and improving fuel availability nationwide. This integration signalled the early stages of Nigeria’s transition from a predominantly import-dependent fuel economy toward a refinery-anchored supply system, positioning Nigeria as an active participant in West African refined fuel markets,” the report stated.

It added that local refining had begun to displace imported refined petroleum products, easing long-standing supply bottlenecks and reducing Nigeria’s exposure to volatile international fuel markets.

“Local refining capacity increasingly displaced imported refined products, improving fuel availability nationwide and signalling the early stages of Nigeria’s transition from a predominantly import-dependent fuel economy toward a refinery-anchored supply system,” it said.

Findings showed that while consumers benefited from improved product availability and supply stability, marketers bore the brunt of the transition as deregulation intensified competition and compressed margins.

The report explained that under a fully deregulated regime, market-driven pricing has fundamentally reshaped retail and wholesale fuel transactions, making the downstream sector more responsive to supply dynamics but significantly more volatile.

It stated, “While deregulation improved supply responsiveness, it also exposed the market to sharper price movements, foreign exchange pressures, and cost volatilities,” highlighting the increasingly complex operating environment for marketers.

This volatility has already begun to reflect in the financial performance of major operators. For the first time in at least 21 years, shareholders of TotalEnergies Marketing Nigeria Plc will not receive a dividend for the 2025 financial year, as a fierce price war triggered by the entry of the Dangote Petroleum Refinery pushed the company into a loss position.

The firm reported a 26 per cent decline in revenue to N767.63bn for the year ended December 31, 2025, down from N1.04tn recorded in 2024, according to its audited financial statements released on the Nigerian Exchange Limited.

Its profitability weakened significantly, with profit before tax swinging to a loss of N12.46bn in 2025 from a profit of N42.26bn in the previous year. Similarly, the company posted a loss after tax of N13.85bn, a sharp reversal from the N27.50bn profit recorded in 2024, underscoring the intense pressure on margins across the downstream sector.

Industry operators, it added, are now navigating a more complex environment where pricing is no longer centrally controlled, forcing companies to compete aggressively on efficiency, sourcing, and logistics.

The report highlighted the role of the Nigerian Midstream and Downstream Petroleum Regulatory Authority in stabilising the market through oversight and reforms. According to the report, the authority intensified anti-smuggling operations, improved pricing transparency, and collaborated on regional petroleum benchmarks to boost investor confidence.

It stressed, however, that the emergence of a dominant local refinery does not eliminate the need for a competitive and open market structure. “Throughput variability, logistics constraints, and pricing debates showed that no single facility, in isolation, can guarantee long-term national energy security,” it added.

Beyond petroleum products, the report said Nigeria made significant progress in aligning its downstream reforms with global energy transition goals. It pointed to increased investments in Compressed Natural Gas, Liquefied Petroleum Gas, mini-LNG, and renewable energy solutions as part of efforts to diversify the energy mix and improve access.

“Nigeria’s strategic commitment to energy transition became increasingly evident through sustained policy support for gas-based solutions, cleaner transportation fuels, and power-sector efficiency initiatives,” the report stated.

Despite the gains recorded, the report warned that structural bottlenecks continue to threaten the stability of the sector. These include infrastructure deficits, logistics inefficiencies, limited investment inflows, and uncertainties around evolving regulatory frameworks.

It noted that the transition to a fully integrated domestic refining ecosystem remains uneven, requiring sustained policy clarity and institutional strengthening. Nigeria has historically depended heavily on imported refined petroleum products due to the poor performance of its state-owned refineries.

However, the entry of large-scale private refining, led by the Dangote Petroleum Refinery, alongside the Federal Government’s deregulation of the downstream sector, has triggered a major reset in the industry.

While deregulation eliminated fuel subsidies and improved supply availability, it also exposed marketers to global crude price swings and foreign exchange fluctuations, significantly altering their cost structures.

The report noted that despite these challenges, Nigeria remains Africa’s leading crude oil producer and one of the continent’s most strategic energy markets. “The foundations laid across the sector in 2025 position the country for deeper industrial growth, enhanced energy security, and stronger regional and global relevance,” it added.