The Federal Government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority, has called for the establishment of a regional benchmark for refined petroleum products in West Africa, saying fuel prices in the region should not automatically be determined by crises in Western Europe and the Mediterranean.
The NMDPRA Chief Executive, Rabiu Umar, made the call 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 NMDPRA, S&P Global Commodity Insights and the West Africa Regulator Forum, with the theme: “Funding West Africa Infrastructure & Distribution to Create a Transparent Market for Regional Price Benchmarks.”
Mr Umar, who also chairs the West Africa Regulator Forum, said the region had reached a point where its growing refining capacity and market demand required a pricing mechanism that reflected its own realities.
“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,” Mr Umar said.
He argued that petroleum prices should reflect factors directly affecting the regional market, including geopolitical developments, demand, supply and other market complexities.
“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,” he said.
According to him, the proposed benchmark would allow West Africa to develop a pricing system specific to its market.
“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,” Mr Umar added.
NMDPRA outlines regional pricing roadmap
Mr Umar said the objective was not to isolate Nigeria or West Africa from the international petroleum market but to ensure that regional prices accurately reflected the conditions of the market being served.
He said the proposed system should take into account local supply and demand, inventory levels, logistics, refining capacity and trading conditions.
The NMDPRA chief also stressed that the initiative was not simply about publishing another fuel price.
According to him, West Africa needs an entire market structure capable of generating credible and transparent price discovery.
“Last year, our focus was on establishing the foundation. This year, our focus must be on execution,” Mr Umar said.
He identified reliable financing, increased refinery capacity, stronger logistics and storage networks, interconnected ports, roads, rail and pipelines, harmonised product regulations and standards, transparent market data, stronger cross-border cooperation and regional and international capital as key requirements for achieving the objective.
Infrastructure crucial to benchmark success
Mr Umar warned that establishing a reference price alone would not automatically create a functioning regional trading hub.
“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,” he said.
He noted that Africa already possesses three important components needed to develop a strong regional petroleum market: resources, demand and expanding refining capacity.
“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,” Mr Umar added.
Different fuel standards hinder regional trade
The NMDPRA chief also identified differences in petroleum product specifications among West African countries as another major obstacle to cross-border petroleum trading.
He said countries needed to work towards harmonising product standards to make regional trade easier.
“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 neighbors having different products and specifications,” Mr Umar said.
He explained that different specifications make it significantly more difficult to move and trade petroleum products across borders.
S&P Global urges stakeholders to take ownership
Also speaking at the conference, the Head of Platts at S&P Global Energy, Vera Blei, said West Africa had made significant progress towards developing a credible regional pricing system.
Blei said the success of the proposed benchmark, however, would depend heavily on market participants creating sufficient liquidity around the price references.
“We publish gasoline and refined product price benchmarks for the region. They’re transparent, they’re robust, and have become the references in Nigeria and West Africa,” Mrs Blei said.
She urged regulators, refiners, traders, financiers and other industry stakeholders to take ownership of the proposed benchmark rather than leaving its development solely to regulators and price-reporting agencies.
“We can give the foundations. We can make the reference prices available. It’s down to everybody in this room to take bold steps to really bring them alive,” Mrs Blei said.
The push for a West African refined fuel benchmark is therefore being positioned as part of a broader effort to strengthen regional petroleum trade, improve price transparency and reduce the extent to which markets in the region are exposed to external pricing shocks that may not reflect local supply and demand conditions.
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