Europe, Mediterranean crises shouldn’t affect Africa petroleum price benchmark - FG

Nigeria's Federal Government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), asserts that petroleum product prices in Africa should not automatically be determined by crises in Western Europe and the Mediterranean. The government argues that West Africa requires a regional benchmark that accurately reflects its own market dynamics.

Speaking at the second West Africa Refined Fuel Market Conference in Abuja, Authority Chief Executive Rabiu Umar stated that the region can no longer sustain a situation where distant disruptions influence African markets, particularly when those disruptions are unrelated to West African fundamentals. The conference, co-hosted by the NMDPRA, S&P Global Commodity Insights, and the West Africa Regulator Forum, focused on establishing a transparent regional pricing system for refined petroleum products.

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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.

Umar emphasized that relying on external price references exposes Nigerian and other West African consumers to price volatility caused by events thousands of kilometers away. This is particularly unsustainable given the rapid changes in West Africa's refining landscape and Nigeria's growing role as a supplier of refined products within the region. Umar, who also chairs the West Africa Regulator Forum (WARF), highlighted the increasing refining capacity on the continent.

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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 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," Umar said. He stressed that prices should be based on geopolitical issues, demand and supply, and market complexities specific to the region. This initiative presents an opportunity for West Africa to develop a pricing mechanism that is responsive to its own challenges and shielded from external volatilities.

The call for a regional benchmark comes amid renewed volatility in international energy markets, particularly following tensions around the Strait of Hormuz. While international benchmarks like Brent crude have seen price surges, the Nigerian government's initiative aims to insulate African markets from such external shocks and foster a more stable and predictable pricing environment.

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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.