Lack of refining capacity in Nigeria for basic fuels and other petroleum products has left the nation dependent on the importation of lubricants, with yearly expenditure likely to exceed the $500 million benchmark going by the rally in oil prices.
Similarly, the calls for energy transition leading to a gradual switch from base oils to synthetic oils, currency devaluation and shutdown of many foreign refineries due to the COVID-19 pandemic, have impacted the importation of base oils for blending. These have led to at least 300 per cent rise in the price of lubricants from about N850 per litre to N2000 per litre.
At almost $2 a litre, Nigeria’s yearly base oil demand of 300 million litres puts the nation’s foreign exchange consumption at about $500 million or N205 billion ($1: N410).
In the first quarter of 2021, Nigeria spent N71.6 billion on the importation of lubricants that would be blended locally, according to the latest trade data published by the National Bureau of Statistics (NBS).
According to data from the Lubricants Producers Association of Nigeria (LUPAN), the country’s lubricant market demand volume total at 600,000 metric tons in 2019, accounting for about 20 per cent of Africa’s total lubricants demand. The impact of the COVID-19 pandemic has, however, affected demand volumes by at least 50 per cent.
With the cost of locally blended products higher than that of imported lubricants due to prevailing macro-economic challenges, many businesses with large storage capacities have resorted to raising Letters of Credit (LCs) for importation rather than buying locally.
Data from the Department of Petroleum Resources (DPR) showed that the 34 lube blending plants in the country have 120.57 million litres of base oil storage capacity.
While the Kaduna Refining and Petrochemical Company (KRPC) was the only refinery designed for the production of Base Oils, Asphalt (Bitumen) and Waxes, the non-performance of the refinery has left the nation largely dependent on the importation, as upcoming refinery from Dangote and modular refineries focus on fuels like the Premium Motor Spirit (PMS), Automotive Gas Oil (AGO) or Diesel oil, Kerosene, Fuel Oil, among others.
Presently, the local blending plants depend solely on importation for their feedstock and recycling of base oils to meet market demand.
Latest base oil price report showed that though Nigeria and other export markets are delaying large purchases while waiting for markets to soften over the summer, prices appear to be held at the higher levels with no real downward pressure.
