Europe Crises Shouldn’t Affect Africa Petroleum Price Benchmark – FG
The Federal Government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority, has said crises in Western Europe and the Mediterranean should not automatically determine petroleum product prices in Nigeria and other African countries, arguing that West Africa needs a regional benchmark that reflects its own market realities.
It said West Africa could no longer afford a situation where disruptions in Western Europe or the Mediterranean automatically influence the prices of petroleum products in African markets, even when the factors behind those disruptions have little or nothing to do with the region.
The Authority Chief Executive, Rabiu Umar, said this on Tuesday at the second West Africa Refined Fuel Market Conference in Abuja, where regulators, refiners, traders, financiers and other industry stakeholders renewed efforts to establish a transparent regional pricing system for refined petroleum products.
The conference is jointly hosted by the Authority, S&P Global Commodity Insights and West Africa Regulator Forum, with the theme: “Funding West Africa Infrastructure & Distribution to Create a Transparent Market for Regional Price Benchmarks.”
The conference is aimed at moving the region from discussions about price discovery to the actual development of a functioning petroleum trading and pricing hub.
Umar said the continued use of external price references meant that petroleum consumers in Nigeria and other West African countries could be affected by disruptions that occurred thousands of kilometres away and were unrelated to the fundamentals of their own markets.
He said the situation was no longer sustainable, particularly as West Africa’s refining landscape was changing rapidly and Nigeria was emerging as a major supplier of refined petroleum products to the region.
The NMDPRA boss, who also doubles as the WARF Chairman, said, “If we look at the refining capacity on the continent and how it has been increasing, it simply doesn’t make sense that if there is a problem in Western Europe or in the Mediterranean, it is going to affect our pricing in Africa.
“There may be issues which have absolutely nothing to do with what is going on here. And prices should be determined on the basis of geopolitical issues, demand and supply, and complexities within the market. So we feel this is a great opportunity for Africa, and West Africa in particular, to really have something that is specific to us. If we have a problem, it is reflected in the pricing. If we don’t have a problem, then we are to be shielded to an extent, I would say, from what is going on in other locations.”
The call comes against the backdrop of renewed volatility in international energy markets following the crisis around the Strait of Hormuz, one of the world’s most important oil shipping routes. The latest tensions around the strait have pushed Brent crude sharply higher, with the benchmark reaching above $90 per barrel at points in recent days before easing as markets weighed diplomatic efforts between Iran and Oman.
That distinction, he argued, is at the heart of the campaign for a West African reference market.
He said, “If we look at the refining capacity on the continent and how it has been increasing, it simply doesn’t make sense that if there is a problem in Western Europe or in the Mediterranean, it is going to affect our pricing in Africa. There may be issues which have absolutely nothing to do with what is going on here in the continent. But prices are determined on the basis of geopolitical issues, demand and supply, and complexities within the market. So we feel this is a great opportunity for Africa, and West Africa in particular, to really have something that is specific to us.
“If we have a problem, it is reflected in the pricing. If we don’t have a problem, then we are shielded to an extent, I would say, from what is going on in other locations.”
He explained that the roadmap required reliable financing, refinery capacity, stronger logistics and storage networks, interconnected ports, roads, rail and pipelines, harmonised product regulations and standards, transparent and comparable market data, stronger cross-border cooperation and the mobilisation of regional and international capital.
“A reference price is not by itself a trading hub. A conference is not a market. Regulatory cooperation, important as it is, cannot substitute for physical infrastructure, commercial liquidity, market information, and operational excellence on which a credible trading hub must stand. Africa possesses resources. Africa possesses demand. Africa possesses refining capacity, and that is also expanding. What we must now build is the infrastructure that efficiently connects all three”, he added.
Umar also urged West African countries to stop duplicating infrastructure and instead develop assets based on their comparative advantages.
He said, “This is also why we must think regionally. Not every country needs to replicate every asset that we have. So for example, Nigeria today stands as one of the most tanked countries. If you look at the number of tanks we have versus the consumption that we have, there is absolutely no point.
“If you look at Europe, for example, our region is a trading hub for oil and gas, for all the refined products. Why? The other countries could also have invested in similar infrastructure, which would have led to duplication. The most important thing is what each country’s specific advantage is relative to the region, so that way everybody is doing what they are really, really good at. And this is why we must think regionally. We have to think regionally.”
He also identified differences in petroleum product specifications across countries as another major obstacle to cross-border trade. According to him, varying specifications make it difficult to move products seamlessly from one West African market to another and undermine the development of a single regional market.
“We also have the second issue of what is the quality of products. What is the specification of products from one country to another? We cannot have from here to Nigeria, to Ghana, to the United Republic, even our right-next-door neighbours having different products and specifications. What that does is that it makes trading across the border very, very difficult.”
Umar said regional integration would therefore help optimise existing infrastructure, reduce duplication and direct scarce capital towards projects capable of delivering the greatest regional impact.
“Capital will go where projects are bankable. Risks are understood, regulation is predictable, and returns can be sustained. Our responsibility as governments, regulators, and players is therefore to create the conditions that allow capital to move confidently. For investors, predictability matters. For operators, efficiency matters. For consumers, affordability matters, and reliability. For regulators, safety, integrity, competition, and compliance matter. A sustainable market must accommodate all four”, he stated.
The NMDPRA boss further identified reliable market data as a critical requirement for credible regional price discovery.
He said a benchmark could not be trusted if it was based on an opaque market with limited transactions and unreliable information on supply, demand, inventories and product availability.
“A credible benchmark cannot emerge from an opaque market. Price discovery requires sufficient transactions, willing participants, reliable reporting, and confidence that market information indeed reflects actual commercial activity.
“We must therefore develop a culture in which reliable information on supply, demand, inventories, infrastructure, availability, and legitimate transactions can support better commercial decisions and effective regulation.”
He said the West Africa Regulators Forum had a major role to play in creating an environment where different national markets could operate with sufficient regulatory compatibility to facilitate cross-border trade.
“We do not need every country to have identical laws. We need sufficient compatibility to allow trade to occur safely, transparently, and efficiently. And this is the difference, really, between regulatory uniformity and regulatory integration.”
Umar said the regional roadmap beyond 2026 would focus on five key areas, including improving physical market mobility, financing strategic infrastructure, optimising product standards and regulations, strengthening market data and transparency, and building a complete trading ecosystem.
He said a mature regional market would require refiners, traders, terminal operators, ship owners, marketers, banks, insurers, commodity exchanges, data providers and regulators to operate within an environment of commercial trust.
“And when these elements come together, the benchmarks will learn to be imposed. The market itself will produce the benchmark,” he said.
He said the ultimate objective was to transform West Africa from a region that largely consumes petroleum products priced elsewhere into an increasingly influential centre of price discovery, trading, investment and value creation.
“In 2025, we develop the roadmap. In 2026, we must finance and execute it. In the years ahead, our major success must be a West African market in which products move more efficiently, supply is more secure, investors have greater confidence, regional trade expands, and prices increasingly reflect the fundamentals of our own markets.”
