Higher prices, scrapped subsidies, curtail demand
Low consumption impacting refiners in Europe
Delayed Dangote refinery unable to ease pain
Nigerian gasoline demand has halved since President Bola Tinubu scrapped the country’s costly fuel subsidy in late May, impacting European refiners who typically sell into the country.
Imports of gasoline to Nigeria plummeted to 106,000 b/d in July from 205,200 b/d in May, according to data from S&P Global Commodities at Sea.
This decline follows skyrocketing local gasoline prices after Tinubu’s announcement. Total refined product demand has fallen 41% in the same period, as indicated by the data.
Scrapping the long-standing subsidy could save Nigeria as much as Naira 11 trillion ($2.6 billion) in 2023, according to estimates from the World Bank in June. This move provides relief to a growing government deficit.
Sinking Nigerian demand, driven by high fuel prices, has led to a drop-off in demand for European exports.
European refiners, who were dependent on West African markets, are now facing depressed demand.
The 91 RON FOB AR WAF discount to FOB AR gasoline cargoes was $89/mt on Aug. 10, down sharply from before the subsidy was taken away. On May 22, the spread was at a premium of $50.25/mt, but by the end of the month, it had fallen to a discount.
The subsidy removal has disrupted the longstanding arbitrage for European refiners.
While Nigerian demand has diminished, other destinations have picked up the slack. The US Atlantic Coast accounted for 28% of total gasoline exported from the Amsterdam-Rotterdam-Antwerp region in July.
European traders have been unfazed by sinking demand in West Africa, as the arbitrage remains strong due to tight octane levels.
Nigeria, Africa’s largest oil producer, lacks refining capacity and is forced to import refined products.
The Dangote refinery, a potential solution, remains plagued by delays and cost overruns. Although the refinery is designed to make Nigeria self-sufficient in fuels and supply neighboring countries, its completion is still uncertain.
While insiders suggest a December start-up, the refinery has not yet begun stockpiling crude, leaving doubts about its immediate impact on the rising fuel prices.
