CEM REPORT, ENERGY | Since the removal of fuel subsidy Nigeria’s petrol demand and consumption have drastically declined. The May subsidy removal has also left a gap in the smuggling of fuel to neighbouring countries and a drop-off in demand for European exports.
According to a report by S&P Global Commodity Insights, imports of fuel to Nigeria plummeted to 106,000 bpd in July from 205,200 bpd in May while total refined product demand has fallen 41 per cent in the same period.
The report stated that since the increase in fuel prices in Nigeria which has led to reduced demand for the product, S&P Global Commodity Insights believed that smuggling into neighbouring countries has also reduced if not eliminated, since it’s now unprofitable to do so.
Additionally, the high fuel prices have created a demand gap for European exports, whose refiners had relied on West African markets.
“There is zero demand (in West Africa) at the moment,” a source in the region said. Another European market source said: “Considering the (Nigerian) subsidy removal … demand is indeed depressed.”
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The subsidy removal has shaken up longstanding arbitrage for European refiners. While Nigerian demand in particular has diminished, other destinations have picked up the slack, the report stated.
According to a World Bank report the subsidy removal could save Nigeria as much as ₦11 trillion ($2.6 billion) in 2023 which is expected to provide relief to a growing government deficit.