Fuel prices in Nigeria have not stabilised despite the arrival of a new super refinery. Jide Pratt, Country Manager of TradeGrid and Chief Operating Officer of Aiona, tells PetroleumPrice.ng that the problem was never about refining capacity. It is about policy, and Nigeria is running out of excuses not to fix it.
Nigeria's downstream petroleum sector has seen significant shifts in recent years. How would you describe where things stand today, particularly around pricing?
We are not where we need to be. When a market is deregulated, prices are supposed to be determined by demand and supply. That is the basic principle, but what has happened is that the downstream sector has effectively shifted to one dominant player the refinery. That is a problem.
What needs to happen is that even with local refining capacity, we must still allow imports so there is genuine price competition between local refineries and importers and critically, we need pricing windows. These are buffers that prevent a spike in crude oil prices from hitting the pump immediately. You could have a 14-day window, a 20-day window, or a 30-day window. Or you price around the refining cycle. If crude arrives today and takes 10 days to refine, do we price around those 10 days? These are all mechanisms we need to put in place to move from where we are to a fully liberalised market.
Is Nigeria's bigger challenge at the moment production or distribution?
Both. On the production side, our OPEC quota should be around 1.7 to 1.8 million barrels per day. Nigeria has consistently hovered around 1.4, 1.5, or 1.6 million barrels. We have not met our optimal production capacity.
On distribution, the most efficient way to move refined petroleum products is through pipelines. We do not have a functioning pipeline system anymore. It has become bad over time. As a result, the bulk of distribution is now being handled by trucks. Think about what it takes to move petroleum from Lagos to Kano by road. With a functioning pipeline, that product moves seamlessly from the point of production to the point of sale.
The next best option is coastal transport. If you look at what happens in Calabar, Port Harcourt, and Warri, these are all coastal hubs. If the refinery is in Lekki, then ideally you move large volumes by vessel to those coastal hubs. A single vessel carries 30 million litres. A truck carries 45,000 litres. From those coastal hubs, trucks then handle last-mile deliveries. To the north, you have no choice but to move from multiple points because the north is landlocked.
Trucks should ideally only be used for last-mile delivery. If we are relying on trucks for the majority of our petroleum distribution, we are not getting it right yet.
Will local refining capacity stabilise fuel prices in the long term?
Yes and no. What we have seen of late is that as crude oil prices go up, even with a super refinery, prices have not stabilised and you do not stabilise prices without an effective pricing window.
If prices are published every 14 days based on what crude cost during that window, what the exchange rate was, and where the petroleum pricing index sat, you create an average. If you hold prices at that average for 14 days, it means that even if crude keeps climbing, nothing changes at the pump until the next window opens.
So it is not a question of refining. It is a question of a pricing window. Even if we had three or four more refineries, if something like the current global conflict happens again, those refineries would still price at what I would call replacement cost. As the market goes up, pump prices go up with it.
There is one more layer. The super refinery is currently sourcing about 60 per cent of its crude from imports and only 40 per cent locally. That means we remain exposed to shipping and freight costs from outside. If we were producing closer to our OPEC quota and feeding local refineries with domestic crude, that would offer some advantage. But the single most important mechanism, above everything else, remains pricing windows.
What role is TradeGrid playing in bridging the distribution gap?
When we started, the vision was to digitise oil and gas transactions. We wanted to find a way for people to conduct oil and gas business on an app. Before that, everything was done through phone calls: do you have a product, what are the specifications, how much can you supply? When we built the app, one of the core aims was to enhance transparency.
Our model works like this. We buy from major marketers and importers. We then layer those products onto distribution partners we have profiled and verified. We do not give our retail partners cash. We supply products in compartments. A retailer's truck is loaded, they sell over five or six days, and then we replenish. The working capital burden on the retailer is significantly reduced.
This became especially important when the fuel subsidy was removed and pump prices tripled overnight. Many retailers could no longer afford to buy full loads. Our compartment model directly addressed that.
In the longer term, the country must look seriously at revamping its pipeline infrastructure. A public-private partnership model, specifically build-operate-transfer, where private entities take ownership of pipeline segments, guard them, and earn from them, is the only path to efficient, scalable distribution. That way, petroleum products move most efficiently and trucks return to doing what they should be doing: last-mile only.
You have been vocal about pricing and market reform. What must stakeholders prioritise to unlock growth in Nigeria's energy sector?
Policy must match commercialisation. Take gas as an example. We have enormous gas resources. The policies are there. The commitments are there. But implementation stalls because capital and financing remain the missing link. Banks ask for offtake agreements before committing. Developers cannot provide offtake agreements for infrastructure that has not yet been built. It becomes a circular problem that delays everything.
What we need is capital. That is and I will use this word deliberately partial to Africa. If the African Development Bank and the African Energy Bank begin to actively profile and finance gas transactions across the continent as part of the energy transition, then from a capital standpoint, we can begin to make real progress. We also need creative financing instruments, stock exchange listings and blended finance structures, to drive the commercial gasification of Nigeria.
The second critical piece is placing the right people in the right roles. There is a meaningful difference between upstream, midstream, and downstream expertise. Of late, we have seen a strong upstream mind placed at the upstream regulator. That is a positive development. The same intentionality must be applied at the downstream level. Policy, capital, and technical expertise must converge. If they do not, we will continue going around in circles and the infrastructure gap will never close.
Finally, do you expect fuel prices to stabilise anytime soon, or will volatility persist?
As things are currently set up, the volatility will continue for as long as the war continues. That is the reality. The government has not come forward with any clear policy to peg or buffer domestic prices from external shocks.
And here is what frustrates me. If crude oil is at $120 today and the budget benchmark was $65, we are earning $55 more per barrel. Why is the government not saying that for local refining, based on a domestic crude supply obligation, we will sell at open market price minus a discount? If you are making an extra $55 per barrel, why not take $10 or $20 and pass that discount to local refineries, with the condition that they sell those products domestically and do not export them?
Other countries are working around this. Pricing windows are being announced. Taxes and levies are being temporarily removed where needed. Some have given a two-week buffer before repricing so that global price movements do not hit the pump immediately.
If we do not act from a policy standpoint, we will not see anything different. As long as the war continues, the volatility will continue.