Petrol imports from Europe by the largest economy in Africa have fallen by about 48 percent since President Bola Tinubu scrapped the country’s costly fuel subsidy in late May, impacting European refiners who typically sell into the country.
The demand for Premium Motor Spirit, also known as petrol, has dropped by almost half on the back of the removal of fuel subsidy in late May, data from S&P Global Commodities at Sea has shown.
The report showed that imports of petrol to Nigeria plummeted to 106,000 barrels per day (bpd) in July from 205,200 bpd in May, indicating a 48 percent decline in demand, after local petrol prices skyrocketed following President Bola Ahmed Tinubu’s announcement.
According to the report, total refined product demand has fallen 41 percent in the same period. “Scrapping the long-standing subsidy could save Nigeria as much as N11 trillion ($2.6 billion) in 2023, according to estimates from the World Bank in June, providing relief to a growing government deficit.”
Sinking Nigerian demand, driven by high fuel prices, has also led to a drop-off in demand for European exports, whose refiners had relied on thirsty West African markets.
“There is zero demand [in West Africa] at the moment,” a source in the region said.Another European market source said: “Considering the [Nigerian] subsidy removal … demand is indeed depressed.”
According to the report, the subsidy removal has shaken up longstanding arbitrage for European refiners.While Nigerian demand in particular has diminished, other destinations have picked up the slack.
The US Atlantic Coast made up 28 percent of total petrol exports from the Amsterdam-Rotterdam-Antwerp region in July amid persistently low stocks, according to Kpler shipping data, increasing its share of the low teens almost in tandem with shrinking Nigerian demand.
As a result, European refiners have been unfazed by sinking demand in West Africa. “The arb is strong. Octanes are tight, so gasoline remains well supported,” a trader in Europe said.
The report showed that European traders already faced being crowded out by Russian refined products that have flooded into Africa – including Nigeria – since the onset of the war in Ukraine saw European countries boycott Russian oil products. “Yet even Russian exports to Nigeria have fallen sharply since the fuel subsidy was scrapped.”