*What gives as Nigeria’s first private refiner faces down its first global oil shock test.
The news of the March 1 U.S.-led attack on Iran sounded far away to Jenn Nwaoha. She revved her SUV, and drove out to her cold room at Iba, Lagos, on March 2.
Traffic along the LASU-Isheri road lightened up too early. Most fuelling stations shut down their pumps and gates. Some commercial buses rolled around the stations; others scooted from one station to another.
“War makes it difficult for us to tell our children the world is a safe place for them,” she recounted the first thought that grazed her mind that morning.
When she returned by 8 pm, those stations she saw open earlier had adjusted their old pump prices, and displayed the current ones.
“I saw N900, N950 displayed. And many stations still remained closed along the expressway except some MRS,” she told the WorldStage. “And MRS sold lower than NNPCL and others.” Her emphasis on Dangote Refinery making fuel available at MRS stations tried to make a point. The private refinery had adjusted its ex-depot price by 12 percent to N874 earlier that day.
That night it dawned on Jenn that adults, too, have daily economic choices to juggle in times like this. She decided to leave her car at home the following day.
But the Islamic Revolutionary Guards Corps blocking some God-knows-where called the Strait of Hormuz didn’t look like her cup of tea yet. The worst—scarcity and price hikes—coming while the war lasted became her biggest concern.
Nosa Omorodion, Schlumberger country director, worried about neither of these. The positives that turned up in the crisis for Nigeria appealed more to him when he spoke to WorldStage.
He agreed there was volatility. But his observation was Nigeria, as part of a global village, couldn’t have helped it.
Crude prices jumped 26 percent to about $84 per barrel. And petrol rose 13 percent to around N900 at the pump.
It’s all a cycle.
A similar geo-political crisis rocked global oil supply in 2022. Russia just invaded Ukraine then. And the sanctions the West and Europe slammed on the invader pitched up crude prices.
The commodity rose 66 percent: from $62 per barrel to $103 per barrel. In Nigeria, the daily consumption stood at about 63 million litres, according to the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA). The pump price increased to N800 per litre, up from N288 per litre.
That increase contrasted with the 2020 dip—85 percent. Covid-19 pandemic had jolted the world. Nigeria consumed 56 million litres of petrol daily then. The fall made the government rack up a budget deficit. Fuel importation became too costly even at $37 per barrel. Prices rallied later in the year, and a partial deregulation spiraled things upwards. At the pump, consumers paid N162 per litre, representing a 15 percent hike.
During both shocks, the $20-billion Dangote Petroleum Refinery remained one vast construction site in Lagos. Its owner Aliko Dangote was just keeping faith. Nigeria would someday have one of the world’s biggest refineries. The plant, now in full swing, takes in 650,000 bpds of crude, and cranks out 75 million litres of refined oil, with the potential to refine 1.4 mbpds.
The eruption of the US-Iran hostilities and the panic that followed never disrupted Dangote’s production of its daily 40 million litres of petrol. But Jenn still dumped her car, and jumped buses the following day.
Transporters jacked up fares. And some stations along the expressway she normally took to work re-opened. Amidst the panic, the commercial drivers still knew where the pump price was lower.
“Dangote’s enemies didn’t want him to start that refinery because of their illegal profits he would expose,” a mini-bus driver en route to Ayobo told the WorldStage News in Yoruba.
Loyalty compelled the driver to fill his tank at a station other than MRS. But, for him, the differential still added up. “Go to any MRS now. They sell at least N5 cheaper than any other, even the NNPC. Multiply that by 20 litres.”
One can multiply the differential by the 40 million litres (over 60 percent of the total supply) the refinery produced daily, according to the NMDPRA January factsheet. Daily supply stood at 65 million litres then. And Nigerians consumed 64 million litres daily.
Not much has declined since January, despite the Iran crisis. The refinery said it currently absorbs 20 percent of the crude price increase to make fuel available. The reason is the local crude supply—five out of13 cargoes monthly—is not enough. Despite that, the company still covers more than 60 percent of Nigeria’s daily petrol consumption.
For Omorodion, that’s where Nigeria should count its blessings.
Before Dangote, he told the WorldStage, Nigeria stood right in the ‘twilight zone’ of international refined product markets. “Now domestic refining insulates the country from some of the chaos.”
He highlighted foreign exchange as the ‘single most significant benefit’ of Dangote refinery. By refining locally, Nigeria retains the value it previously exported to buy refined fuel.
“Projections suggest the country could save up to $10 billion annually in foreign exchange,” he said. “This helps ease pressure on the naira and strengthens the Central Bank’s ability to defend the currency.”
Omorodion also explained Nigeria’s change of status, from consumer to producer. According to him, after meeting local consumption demand, Nigeria now has a surplus: 20 million litres daily, earmarked for export.
Jenn might not be aware of that plenty. But she got back in her car the following day she parked it, the fourth day of the U.S.-Israel-Iran war. “I bought 16.39 litres at N915,” she said. “That could take me three days.”
She admitted the situation was better now than it was in the last two global oil crises. “We bought N1000 per litre then, and N1500 from black market.”
Dangote, too, tested the N1000/litre mark on March 6 when it priced up its ex-depot rate to N995 per litre.
Omorodion explained the dynamics at play: Nigeria selling crude to Dangote at the prevailing rate generates more revenues. “But Nigerians will have to pay for the pump prices of petroleum products.”
The supply side matters more to many consumers. And Dangote has assured it will cover that.
Jenn still worried about some fuel tankers taking hits—from the Strait of Hormuz.
