Nigeria’s upcoming election pushes up petroleum products’ flow to West Africa

Against the backdrop of Nigeria’s 2019 election, refined petroleum products arrivals into West Africa in December so far are 1.19 million metric tonnes compared with 1.21 million mt in the whole of November, S&P Global Platts trade flow software showed. Of these arrivals, 1.02 million mt were thought to be gasoline, 60,000 mt jet fuel, and 67,000 mt gasoil, and 37,000 mt of ultra-low sulfur diesel.

Gasoline buying interest has sustained from West Africa, particularly from Nigeria, as the country’s February general election approaches.

Most of the 1.02 million mt of gasoline is expected to arrive in Lagos, Nigeria. The West African country is looking to keep offshore gasoline supply topped up to forestall any shortage going into the general election in February.

According to the Nigerian National Petroleum Corporation (NNPC), Nigeria currently has around 2.6 billion liters of gasoline in stock, enough to cover at least 52 days of consumption. The state-oil company has been supplying the local market with gasoil cargoes to keep retail prices low, sources said.

In addition to the existing demand from NNPC, demand from private importers also increased following the drop in ICE low sulfur gasoil flat prices over November. This, in turn, supported 0.3 percent gasoil price differentials in the region.

However, market participants said the West African gasoil market came under pressure from local financing problems. Traders said lower crude oil prices meant Nigeria witnessed smaller inflows of foreign income, in turn limiting the amount of dollars available for the letters of credit.

Letters of credit are issued by banks as a form of guaranteeing payment of imported products, requiring sufficient amounts of dollars to assure payments for oil products.

“There is no availability of dollars to confirm and execute trades. So there is a lot of demand but there aren’t the tools to service it,” a trader active in the region said.

Demand from private companies was also said to be diminishing as margins were shrinking due to ample supply.

FRANK UZUEGBUNAM