• Wednesday, May 22, 2024
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BusinessDay

Nigeria’s petrol imports drop amid higher oil prices

Nigeria’s petrol imports declined in the second quarter of the year on the back of the removal of subsidy, even as the further rise in global oil prices is expected to push up the cost of bringing the product into the country.

BusinessDay’s analysis of new data from the National Bureau of Statistics shows the importation of petrol dropped by 17.5 percent to N1.23 trillion from N1.49 trillion in Q1.

President Bola Tinubu announced on May 29 the removal of subsidy, marking the first in a series of reforms to fix the country’s ailing economy.

Scrapping the long-standing subsidy could save Nigeria as much as N11 trillion ($2.6 billion) in 2023, according to estimates from the World Bank in June, providing relief to a growing government deficit.

The country’s petrol consumption has also dropped following the surge in pump prices. According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority, it fell to 52 million litres daily in July from 64.96 million litres in the previous months.

The decline in petrol imports from Nigeria has taken a toll on European refiners.

The Organization of the Petroleum Exporting Countries said in its latest monthly report that the European market recorded weaker exports to West Africa in August as fuel demand in Nigeria declined.

“Gasoline crack spreads in Rotterdam increased, benefitting from exports of gasoline to the US, although gasoline exports to West Africa were reported to have declined by around 28 percent following the fuel subsidy removal in Nigeria,” it said.

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The subsidy removal and the subsequent jump in pump prices in Nigeria have also drastically reduced the smuggling of petrol to neighbouring countries such as Benin Republic.

“Pump price hikes in Nigeria have translated into significant increases in the price of smuggled gasoline in Benin (by about 60 percent), exerting pressure on inflation,” Constant Lonkeng, who led an International Monetary Fund team during a visit to Cotonou to assess the economy, said in a statement on Wednesday.

The price of crude oil, from which petrol is derived, has continued to rise in recent months, translating to higher petrol import costs for Nigeria.

Brent crude, the international benchmark oil price against which Nigeria’s oil is measured, stood at $92.15 per barrel on Wednesday at 3:22 pm Nigerian time, compared to an average of $86.15 per barrel a month ago.

Global oil prices have recorded a steady rise since Saudi Arabia and Russia announced voluntary cuts in early September 2023. Riyadh made an additional voluntary cut of 1 million barrels per day and extended it for the month of September, while Moscow voluntarily reduced her exports by 300,000 for the same month.

“The scarcity of dollars has made it difficult for importers of petroleum products to continue further importation. For about two weeks now, the petroleum distribution chain has experienced turbulence,” Joseph Obele, chairman of the Independent Petroleum Marketers Association of Nigeria, Rivers State Chapter, said.

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He advised the Federal Government to ensure the rehabilitation of the nation’s refineries as planned.

Speaking about the capacity to meet domestic consumption, Dolapo Kotun, deputy chairman of the Crude Oil Refinery Owners Association of Nigeria, said: “All (modular refineries) are refining below capacity and making losses on a daily basis, as the only feedstock currently available to them is what those that have marginal fields are producing, or what they can buy from indigenous companies around them that have marginal fields.

“Discussions have been ongoing for a while; no template or framework/process for supply and delivery has been given to our members who are in operations, having long since reached mechanical completion and final inspection.”

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