Category: Power

Crude oil prices dipped on Tuesday after the U.S. government implemented fresh tariffs, raising concerns about global trade tensions and their potential impact on fuel demand.

Brent Crude fell to $70.5 per barrel, while West Texas Intermediate (WTI) dropped to $67.56. Nigeria’s flagship crude, Qua Iboe, declined by 1.9% to $74 per barrel, while Brass River fell by the same margin to $73 per barrel.

The international benchmark, Brent Crude, was down 1.40%, trading at $73.00, as both major crude benchmarks headed for their first weekly loss in a month and the first monthly decline since November 2024.

The price dip comes as the global oil market reacts to ongoing trade tensions, uncertainty in OPEC+ production policies, and prospects of peace talks to end the war in Ukraine.

Why oil prices are falling
On Thursday, former U.S. President Donald Trump reaffirmed that previously delayed tariffs on Canada and Mexico would take effect on March 4.

The policy imposes a 10% tax on energy imports from Canada while also adding a 25% tariff on Mexican and Canadian exports.
In addition, the U.S. imposed an extra 10% tariff on Chinese goods.
The move has triggered fresh concerns about a global trade war, which analysts say could slow economic growth and weaken demand for crude oil at a time when OPEC+ has yet to decide on production levels for April and beyond.
What this means for Nigeria

The decline in crude prices poses a direct threat to Nigeria’s revenue targets, as the government benchmarked oil at $75 per barrel and production at 2 million barrels per day (mbpd) in its 2025 budget.

Any prolonged drop below this threshold could worsen the fiscal deficit, increase borrowing needs, and exert pressure on government finances.

A drop in oil prices also raises concerns about Nigeria’s foreign exchange market, which relies heavily on crude sales for dollar liquidity.

The naira strengthened in the parallel market in February, appreciating from N1,600/$1 to N1,500/$1. However, with oil prices weakening, the naira depreciated slightly to N1,515/$1 on Tuesday.

Despite the recent volatility, the Central Bank of Nigeria (CBN) remains bullish, citing an improvement in crude oil production, which rose to 1.54 mbpd as of January 2025.

The apex bank believes this will help improve Nigeria’s current account position and boost external reserves.

However, the sustained decline in crude prices could threaten this outlook.

Nigeria’s economic stability remains tightly linked to crude oil performance, and the latest price drop highlights the vulnerability of the country’s revenue and exchange rate targets.

As global trade tensions mount and OPEC+ deliberates on output strategies, Nigeria faces the challenge of navigating an increasingly unpredictable oil market.

The government may need to explore alternative fiscal strategies to cushion the impact of revenue shortfalls and mitigate potential currency pressures in the months ahead.

Chief Economist at the SBM Professionals, Dr. Paul Alaje has argued that Nigerians would pay over N1,000 if the ongoing price war between the Dangote Refinery and the Nigeria National Petroleum Company Limited (NNPCL) ends.

Alaje, while speaking on Channels TV, on Tuesday, expressed support for the competition between both companies, noting that if one loses, Nigerians will pay above N1,000 as pump price for petrol.

Nairametrics reported that a price war between Dangote and the NNPCL has resulted in multiple slashes of PMS prices between the two. The Dangote Refinery has been the one initiating the price cuts while NNPCL often follows.

Petrol currently sells in NNPCL retail outlets and Dangote partner outlets for N860 to N900 based on locations, with Lagos having the lowest price.

Alaje said the price war is in the interest of Nigerians, noting that both companies are reducing what he termed “abnormal profits”.

He said: “Very recently, Dangote announced another one, at around 800, less than 850, and you have seen NNPCL responding to it. Yes, you may want to call it a price war, but you see, in economics, when a duopoly fights, it’s the best for the populace, because they will themselves, drive themselves to neutral profit.

“Now, people may ask, what is neutral profit? Neutral profit is that point where all factors of production have been catered for, which includes land, rent on land, labor, wages and salary of labor, profit, the real profit, entrepreneurs, and finally, interest on capital.

“What has therefore been eroded is the abnormal profit.”

Nigerians should be paying below the current pump prices
Meanwhile, Alaje argued that the current pump prices are still high. He said that based on current global trends, the pump price of petrol in Nigeria should be less than what it is.

“Ask me, have we gotten to that point where abnormal profit has been eroded? I will tell you, the answer is no. As of today, our computational review, that PMS should be around 795 to 830.”

NNPCL must stop importing and refine locally
The Economist called on the NNPCL to complete the refurbishment of its refineries and refine locally. He said that would further reduce the price.

He said with the competition still on and with both companies fully producing locally, the price of petrol can go down even below N700.

“This is economics at play. The question is, are we ready for it? I know a number of persons have called, some have even sent emails to explain this to them, could it be similar to what we saw in sugar when the sugar war happened? Could it be what we saw happen in cement, when cement happened? The difference here is that while Dangote claims that 100% of its PMS is produced locally, NNPCL, we still have traces that, perhaps, they cannot, the refinery as of today, could not refine locally.

“My advice is directly to NNPC, if you must compete, you must also produce locally. Why? You will give jobs, the way Dangote is giving it to Nigeria, which is my primary concern, to price before that goes down. We will suddenly realize that without subsidy, we can take a price even lower than 700, your businesses, to effect challenges. Even the gains that government is fighting for, it’s been exposed to the same.”

What you should know
Dangote Refinery stated that it will make a N65/liter refund to marketers who purchased PMS at rates higher than N825 so Nigerians will benefit from cheaper fuel.
The refinery noted that the price reduction is to ease the economic burden of Nigerians, and also a demonstration of support for President Bola Tinubu’s economic reforms.

The National Oil Company of Libya, also known as NOC, has denied holding negotiations to supply crude oil to any local refinery in Nigeria.

In a statement on its official Twitter (now X) account, NOC said on Sunday that the firm is not in any agreement to export to crude oil to Nigeria.

A senior executive with Nigeria’s Dangote refinery stated last week that it was in discussions with Libya to secure crude for the 650,000 barrels per day plant.

However, NOC said such conversation is not ongoing with any refinery in Nigeria.

“The National Oil Corporation denies that it is negotiating or engaging in any talks regarding the supply of crude oil to an oil refinery in Nigeria.

“The National Oil Corporation also confirms that it is committed to its contracts with its international partners and is committed to the legal mechanism for selling Libyan oil raw materials and that it does not operate with an immediate sales mechanism. In addition, the process of determining raw material prices is carried out through a committee of experts and is approved by the Corporation and the Ministry of Oil and Gas,” NOC said.

Devakumar Edwin, the Vice President of Dangote Industry Limited (DIL), revealed this information in an interview with Reuters.

Edwin said the strategic move is aimed at ensuring a steady supply of crude to meet the refinery’s growing demand.

In addition to Libya, the refinery is also exploring crude supply options from Angola. This diversification strategy is crucial given the Nigerian National Petroleum Corporation (NNPC) Limited’s inability to consistently meet the refinery’s 650,000bpd requirement.

“We are talking to Libya about importing crude.

“We will talk to Angola as well and some other countries in Africa,” Edwin said.

What you should know
Since beginning operations in January, Dangote refinery has faced difficulties securing adequate crude supplies in Nigeria.

Despite being Africa’s largest oil producer, the country struggles with theft, pipeline vandalism, and low investment.

As a result, Dangote has resorted to importing crude from as far as Brazil and the United States.

The Dangote Refinery, located in the Lekki Free Zone near Lagos, Nigeria, is one of the largest oil refineries in the world. Initiated by the Dangote Group, it aims to meet Nigeria’s domestic demand for refined petroleum products, reducing the country’s dependence on imported fuel.

The refinery’s projected capacity is 650,000 barrels per day, which is expected to transform Nigeria from an importer to a net exporter of refined petroleum products.

in a statement he issued via his social media platforms, Kyari maintained that he does not own a blending plant in Malta nor did he know any of his colleagues doing so.

Mele Kyari, the group chief executive officer (GCEO) of the Nigeria National Petroleum Company (NNPC) Limited, has challenged billionaire businessman, Aliko Dangote, to reveal the identities of NNPC workers accused of establishing a blending plant in Malta.

In a statement he issued via his social media platforms, Kyari maintained that he does not own a blending plant in Malta nor did he know any of his colleagues doing so.

Dangote had said the NNPC cabals created a petroleum refinery in Malta from where they import inferior fuel into Nigeria.

Kyari, in his response, said, “I am inundated by enquiries from family members, friends and associates on the public declaration by the President of Dangote Group that some NNPC workers have established a blending plant in Malta thereby impeding procurements from local production of Petroleum products.

“To clarify the allegations regarding blending plant, I do not own or operate any business directly or by proxy anywhere in the world with the exception of a local mini Agric venture. Neither am I aware of any employee of the NNPC, that owns or operates a blending plant in Malta or anywhere else in the world.

“A blending plant in Malta or any part of the world has no influence over NNPC’s business operations and strategic actions.

“For further assurance, our compliance sanction grid shall apply to any NNPC employee who is established to be involved in doing so if availed and I strongly recommend that such individuals be declared public and be made known to relevant government security agencies for necessary actions in view of the grave implications for national energy security.”

Senator Heineken Lokpobiri, the Minister of State for Petroleum Resources, chaired a high-level meeting on Monday over the challenges facing the Dangote Refinery, Lagos, which the government believes, is a critical project in the oil sector.

A statement had said the meeting was attended by Mr. Aliko Dangote, Chairman and CEO of Dangote Group; Mr. Farouk Ahmed, Authority Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Other are “Mr. Gbenga Komolafe, Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and Mr. Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Corporation Limited (NNPCL).”

According to the statement, the stakeholders expressed their gratitude to the Honourable Minister for his exemplary leadership and timely intervention in facilitating this crucial dialogue.

None of the four international bilateral electric power customers serviced by the Market operators made any payment against the $14.19 million invoice issued to them for services rendered in 2024/Q1, the Nigerian Electricity Regulatory Commission report has shown.

According to NERC’s first quarter 2024 report, the international customers which includes PARAS-SBEE, Transcorp- Société Béninoise d’Energie Electrique (SBEE), Mainstream- Nigerien Electricity Society (NIGELEC) power utility firm in Niger Republic and Odukpani- Compagnie Energie Electriques du Togo (CEET) owed $ 3.15 million, $4.46 million, $1.21 million and $ 5.36 million respectively.

The report also indicated that Ajaokuta Steel Co. Ltd and the host community (special customers) did not make any payment towards the ₦1.27 billion (NBET) and ₦0.09 billion (MO) invoices received in 2024/Q1.

“This continues a longstanding trend of non-payment by this customer and the Commission has communicated the need for intervention on this issue to the relevant FGN authorities. A continuation of the non-payment may trigger total disconnection from the grid,” NERC stated in the report.

Similarly, none of the bilateral customers within the country made any payment against the cumulative invoice of ₦1.860 billion issued to them by the MO for services rendered in 2024/Q1.

The total revenue collected by all DisCos in the period was ₦291.62 billion out of ₦368.65 billion billed to customers. Also, the total energy received by all DisCos was 7,171.93GWh while the energy billed to end-use customers was 5,769.52GWh, translating into an overall billing efficiency of 80.45 percent.

Ikeja DisCo collected the highest revenue (N57.88 billion) in the period, followed by Eko DisCo at N48.74 billion. While Yola DisCo collected the least revenue at N5.46 billion.

Also, of the total revenue collected in the period, Abuja DisCo collected N48.60 billion, Ibadan DisCo collected N30.35 billion, Benin DisCo collected N22.46 billion, Enugu DisCo collected N21.24 billion, Port Harcourt DisCo collected N20.39 billion.

The aggregate ATC&C loss recorded across all 11 DisCos in the period was 36.36 percent, which comprised 19.55 percent in technical and commercial losses, and 20.83 percent in collection loss. “The aggregate ATC&C loss of 36.36 percent recorded in 2024/Q1 is 8.86pp higher than the allowed aggregate efficient loss target (27.50 percent) applied in the computation of the tariffs in the MYTO.

The Aggregate Technical, Commercial and Collection (ATC&C) loss is a summation of billing losses incurred by a DisCo due to its inability to bill 100% of energy delivered to customers (technical and commercial losses) and the collection losses arising from the DisCo’s inability to collect 100% of the bills issued to customers.

“This means that cumulatively, DisCos recorded losses that are 8.86pp higher than what was allowed to be recovered from the customers – these inefficient losses that are not recoverable from customers will adversely affect DisCos’ profitability.

“All the DisCos recorded decreases in ATC&C loss in 2024/Q1 compared to 2023/Q4 with the highest decreases recorded by Kaduna (-12.97pp) and Benin (-9.35) during the period. Ikeja DisCo outperformed its allowed ATC&C in 2024/Q1 by achieving an actual ATC&C of 15.81% which is lower than the set target of 18.73%.

“This means that during the quarter, Ikeja DisCo was able to earn 100% of its revenue requirement for the period which should allow it to cover all market obligations as well as operational costs. It is worth noting that Ikeja DisCo has the lowest ATC&C target amongst all the DisCos, therefore outperforming this low target is a commendable
achievement.

“The other DisCos did not achieve their target ATC&C in 2024/Q1 with the widest variance (target – actual) being recorded by Kaduna (-34.96pp), Kano (-27.73pp) and os (-21.04pp),” it stated.

The Commission stated that failure of the DisCos to meet their allowed loss targets means they are unable to meet revenue requirements, thereby compromising their long-term financial position. It added that it is working with all the DisCos, to take remedial actions through customer enumeration and increased revenue assurance to improve their ATC&C loss.