Navigating the Undulating Terrain of Nigeria’s Oil Market

Last week marked a significant shift in global oil prices, as crude oil saw its value tumble to depths not seen since 2021. Was it former President Trump’s imposing import tariffs that sparked this? Perhaps it was the unexpected increase in oil supply by OPEC+ that sent ripples through the market, slicing a hefty $10 from global benchmarks per barrel. And suddenly, by Friday, the crude oil prices had plummeted to $65 a barrel.

For many, this sparked a glimmer of hope, especially for oil-importing nations like Nigeria. However, the relief was merely a facade as it unveiled Nigeria’s deeper complexities. According to the Major Energies Marketers Association of Nigeria, as shared in Saturday’s Punch newspaper, even as the landing cost of petrol slightly dipped from N885 to N865 per liter, the market dynamics remained puzzling.

Counterintuitively, the ex-depot petrol price in Lagos, Nigeria’s bustling commercial hub, edged upward by N40, rising from N860 to N900 per liter. It posed an intriguing question: Why didn’t the local market mirror the global price decline? The answer hints at complexities within Nigeria’s national oil narrative.

Nigeria, a land robust with crude resources, finds itself enmeshed in a snare of its own making. The Nigerian National Petroleum Company (NNPC) Limited, often depicted as both a savior and a conundrum, insists that local refiners procure crude in dollars. Why a country rich in crude cannot tap into local currency transactions remains a bone of contention.

The Enigma of the Crude Cost

To further unpack this conundrum, the Crude Oil Refinery Owners Association of Nigeria (CORAN) vocalizes a strong stance. “If crude prices have dropped by N15,481.40, shouldn’t it reflect significantly in petrol prices?” they ask, arguing that prices ought to hover around N400 per liter. Yet, the reality diverges sharply.

CORAN adds another layer of what-ifs: Should international crude prices dip to $50 per barrel, why shouldn’t gasoline cost approximately N350 per liter? However, even with these hypotheticals, the nation braces for a spike in petrol prices.

The dialogue turns even more intriguing as CORAN flags the loss of the “naira-for-crude” initiative—a financial policy with the potential to redefine market dynamics but now a fragment of history, shelved, possibly prematurely. With local refiners left grappling in an imported oil maze, the ripple effect is evident.

Clashing Economies and the Intermediary Influence

Bringing to the forefront more nuanced elements, Eche Idoko, the Publicity Secretary of CORAN, highlights issues extending beyond mere supply and demand economics. “Despite declining international crude prices,” he mentions in an insightful chat with the Punch, “there are forces insistent on the importation of substandard petroleum products into Nigeria.” It’s a harsh critique of middlemen disrupting the potential for indigenous oil benefits to reach everyday consumers.

What CORAN Says About Nigeria’s Oil Market Dynamics

Idoko’s analysis opens the discussion on how domestic refining could alter Nigeria’s fortune. Prior attempts showed promise: prices once sunk to above N700, sparking hope among consumers. Yet, opposing factions successfully dismantled the initiative, leaving many pondering—could the naira-for-crude policy have been a turning point?

Idoko calls it foolhardy for anyone to assume that importing low-quality products is a sustainable strategy, expressing hope that President Bola Tinubu, doubling as the Minister of Petroleum, is aware of the institutional legacy such decisions leave behind.

Naira-for-Crude Debacle with the Dangote Refinery

Naira-for-crude—a concept embodying both simplicity and potential, yet with its own tale. The Dangote Refinery, a symbol of new beginnings, sits at a crossroads within this narrative. The report of NNPC having forward-sold its crude, albeit at robust production levels, adds another layer to the story. Is it strategic foresight or short-term gain?

This forward selling points towards an urgency for cash, possibly to fulfil obligations. Yet, questions linger. Could a stronger currency policy, favoring local refineries, chart a new economic course for Nigeria? Could it unlock the benefits of Africa’s largest oil-producing country—a status Nigeria holds yet struggles to capitalize upon?

The interplay of policy, economy, and daily realities remain ever complex. As we reflect, it urges us to ask: What’s the value of crude, not just in dollars, but in impact?