The Federal Government has called for the establishment of a regional benchmark for refined petroleum products in West Africa, arguing that crises in Western Europe and the Mediterranean should not automatically determine fuel prices in Nigeria and other African markets.
The Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Rabiu Umar, made the call on Tuesday at the second West Africa Refined Fuel Market Conference in Abuja.
The conference brought together regulators, refiners, traders, financiers and other industry stakeholders to advance efforts to establish a transparent regional pricing system for refined petroleum products.
The event was jointly hosted by the NMDPRA, S&P Global Commodity Insights and the West Africa Regulator Forum (WARF), under the theme, “Funding West Africa Infrastructure & Distribution to Create a Transparent Market for Regional Price Benchmarks.”
Umar, who also chairs WARF, said the region’s growing refining capacity made it increasingly important for West Africa to develop a pricing mechanism that reflects its own market conditions.
He argued that disruptions in Western Europe or the Mediterranean should not automatically translate into higher petroleum prices in Africa when the underlying issues have no direct connection to West African market conditions.
According to Umar, fuel prices should take into account geopolitical developments, demand and supply dynamics and other market-specific factors within the region.
He said a regional benchmark would allow West Africa to reflect local market conditions in its prices, shielding the region to some extent from disruptions in unrelated markets while still maintaining links to the international petroleum market.
The NMDPRA chief said the proposed system should be based on West Africa’s own supply, demand, inventory, logistics, refining and trading conditions.
He stressed that the objective was not to isolate Nigeria or the region from the international petroleum market, but to ensure that regional prices accurately reflect the market being served.
Umar said the initiative goes beyond publishing another reference price and requires the development of a complete market structure capable of supporting credible and transparent price discovery.
“Last year, our focus was on establishing the foundation. This year, our focus must be on execution,” he said.
He identified reliable financing, increased refinery capacity, stronger logistics and storage networks, interconnected ports, roads, railways and pipelines as key requirements for developing a functioning regional market.
He also called for harmonised petroleum product regulations and standards, transparent market data, stronger cross-border cooperation and greater access to regional and international capital.
Umar cautioned that regulatory cooperation alone would not be enough to create a successful trading hub.
“A reference price is not by itself a trading hub. A conference is not a market,” he said, stressing the need for physical infrastructure, commercial liquidity, market information and operational efficiency.
He noted that Africa already has many of the fundamental ingredients needed for a regional petroleum market, including resources, demand and expanding refining capacity.
“What we must now build is the infrastructure that efficiently connects all three,” Umar said.
Differences in petroleum product specifications across countries were also identified as a major obstacle to cross-border fuel trading.
Umar said neighbouring countries should work towards greater alignment in product standards to make regional trade easier and more efficient.
He noted that having different fuel specifications from one country to another makes it significantly more difficult to move petroleum products across borders.
Also speaking at the conference, Vera Blei, Head of Platts at S&P Global Energy, said West Africa had made significant progress towards developing a credible regional pricing system.
Blei said S&P Global already publishes transparent and robust gasoline and refined product price benchmarks for the region, which have become important references in Nigeria and across West Africa.
However, she said market participants must take greater ownership of the proposed benchmark and generate the liquidity required for it to become an effective market reference.
She urged regional stakeholders to take concrete steps to turn the existing pricing foundations into an active and widely used regional market.
The push comes as West Africa seeks to strengthen regional petroleum trade, improve price transparency and make greater use of its expanding refining capacity.
