Forex, Base Oil Prices Beset Nigerian Lubricant Market
By Our Reporter

Stakeholders have identified instability in the foreign exchange market and rising base oils prices on the international market as headwinds buffeting the Nigerian lubricant market. Taiye Williams, managing director of Lubcon International emphasised that the major challenges confronting the Nigerian lubricant market are issues of access to foreign exchanges (Forex), interest rates, and the influx of foreign products as well as “issues of multiple taxations and overlapping regulatory oversight”.

“Raw material prices are increasing particularly base oil,” Williams told BND. “Escalating free on board (FOB) prices in the international market, increasing freight rates due to bunker prices, rising insurance and crew costs – the list is endless for traders attempting to move cargoes of base oils into Nigeria.” He explained further that Nigerian lube blenders “appear to be resigned to facing the facts regarding prices which will move up due to the realities of our economic predicaments. However, Williams noted that “end-users are also not prepared for an increase in finished lubricant prices, saying that the Nigerian market just cannot accept higher numbers”.

Emmanuel Ekpenyong, aviation technical manager at Puma Energy corroborated that “access to forex to settle offshore sellers is one of the challenges confronting blenders” on the Nigerian lube market. Additionally, he noted that there is an “inflow of cheap and low-quality finished lubes made from recycled base stocks that are imported from the Middle East and the increasing cost of doing business in Nigeria” which complicates things for local blenders.

For his part, Dike Chijioke, Lubricant, and Fuels sales manager at HOGL added that “lack of structured market supervision by authorities; an influx of substandard products, and duplication of statutory regulatory charges threaten low margins for local manufacturers”. Emeka Obidike, executive secretary of the Lubricant Producers Association of Nigeria (LUPAN) explained how instability in the foreign exchange market affects local blenders: “If a blender imports base oils at the exchange rate of N700 to a US Dollar in July, for instance, at the time the shipment landed in Nigeria in September, the rates would have skyrocketed to N1100 to a US Dollar. So, it does not make business sense for local manufacturers to import base oils without being able to make a profit.”. Additionally, Obidike noted that the influx of substandard finished lubes has become attractive to end-users because of the dwindling purchasing power of end-users in the country. However, Williams explained that “interestingly, despite current challenges of lack of forex, poor banking support system and the rising base oil prices in the international market, more new entrants are entering the Nigerian lubricant market”. He added, “Major Oil Companies that have left the Nigerian lubricant market earlier are making a strong comeback.”