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Friday, September 22, 2023

Nigeria’s Subsidy Removal Squeezes European Refiners

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One of Europe’s main markets for gasoline has shrunk, threatening to squeeze European refiners, after Nigeria removed fuel subsidies, which destroyed much of the country’s domestic demand and a regional market for smuggled fuel.

Average monthly West African (WAF) gasoline imports fell by 56% in the second quarter compared with the first, according to Refinitiv Eikon data.

“The key point is demand from West Africa is drying up,” said Refinitiv Lead Oil Analyst Raj Rajendran.

Seasonally, June loadings from the Amsterdam-Rotterdam-Antwerp (ARA) hub to West Africa fell to 629,000 tonnes this year from 895,000 tonnes last year and 1.2 million tonnes in 2021, Refinitiv data showed. Loadings dropped to 627,000 tonnes in July so far this year from 1.5 million tonnes last year and 1.4 million tonnes at the same time in 2021.

At the end of May, Nigeria’s President Bola Tinubu scrapped a popular but expensive subsidy on the fuel, which cost the cash-strapped government $10 billion last year. Petrol demand in response fell by 28%, official data showed.

Meanwhile, the black market for smuggled subsidised Nigerian fuel in Togo and neighbouring Benin and Cameroon has collapsed, further reducing demand for shipments via Nigeria.

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