FEATURE: Nigeria gasoline prices skyrocket as private companies enter fuel import game

The price of gasoline has jumped 26% in Nigeria since new president Bola Tinubu ended a longstanding fuel subsidy on May 30, with the country's state-owned oil company blaming market forces that now determine pump prices in a statement July 19.

The price of gasoline hit an all-time high of Naira 617/liter (81 cents/liter) on July 19, up from Naira 488/l six weeks ago, prompting protests by rights groups and labor unions.

"These are just prices depending on the market realities," said Mele Kyari, CEO of Nigeria National Petroleum Corporation. "This is the meaning of making sure that the market regulates itself. Prices will go up and sometimes they will come down also."

Kyari added that "there is no supply issue" and Nigeria's current gasoline stock is capable of meeting demand for 32 days without new imports.

Experts blamed the price rises on rising global oil prices and a weak naira.

Shortly after taking office, Tinubu announced Abuja would finally abolish its extremely costly gasoline subsidy, which he said could no longer be justified in the face of dwindling resources, and end the NNPC monopoly by allowing private companies to import fuel for domestic consumption. Successive administrations have failed to scrap the subsidy program.

On May 30, Kyari said the NNPC had funded the costly subsidy -- estimated at $10 billion in 2022 -- from its own tight cashflow, because the government was unable to cover it.

Despite being Africa's top oil producer, with current production of 1.4 million b/d of crude and condensate, Nigeria imports around 1 million-1.25 million mt/month of gasoline to meet national demand of around 50 million-60 million liters/day, due to the poor state of its refineries, which are currently down for repairs. The subsidy represented the difference between the landing cost of imported gasoline and the regulated pump price at filling stations nationwide.

Dangote hopes

Labor unions and rights groups in the country on July 19 said they expected the government to restore local supply of oil products before abolishing the gasoline subsidy, which critics say allowed unscrupulous firms to game the system, while failing to help the poor.

With state-owned refineries offline, the country is depending on the new Dangote refinery to bridge the gap in local fuel supply and make Africa's biggest economy self-sufficient in fuels.

Built by Aliku Dangote, Africa's richest man, the 650,000 b/d refinery was inaugurated on May 22 and is expected to begin production next month. However, company sources told S&P Global Commodity Insights that operations are being delayed due to logistical problems.

The project has faced years of delays and cost overruns since first being mooted in 2014.

"There are hurdles...but the company is working round the clock to bring the refinery onstream as early as possible," a company source said. "This is a $21 billion project and the owners are as anxious as everyone else to start making a profit as soon as possible."

Private importers

With Nigeria still dependent on fuel imports for now, the country's fuel regulator, the Nigerian Midstream and Downstream Petroleum Regulatory Agency, said dozens of private companies have taken advantage of the free-market price regime to enter the gasoline import game.

Previously the NNPC was the sole importer of gasoline, using crude swap contracts, but now 56 private firms have been licensed to import gasoline, with 10 of them approved to supply products in the third quarter of 2023.

Refined product imports have been a huge drain on Nigeria's foreign exchange reserves and the value of its currency, worsening the country's economic hand.

On July 18, agency head Farouk Ahmed announced the delivery of the first cargo of imported gasoline by private companies. The 20 mt cargo was brought in jointly by three companies: A.Y. M. Ashafa, Prudent and Emadeb Energy Services.