Last week, on September 21st, Russia announced a temporary ban on diesel exports to all countries except Belarus, Kazakhstan, Armenia, and Kyrgyzstan, aiming to stabilize its domestic market.
However, on September 25th, Russia eased some of these restrictions, allowing the export of bunkering fuel for specific vessels and diesel with higher sulfur levels. Prior to this time, there had been a global diesel shortage leading to higher diesel prices.
Reuters reports that Russia’s fuel market has faced recent challenges, including scheduled maintenance at oil refineries, transportation bottlenecks, and the depreciation of the ruble, incentivizing fuel exports. Consequently, Russia restricted exports to address diesel and gasoline shortages and prevent a potential fuel crisis.
Recall the European Union’s ban on Russian fuel imports in response to the Ukraine invasion. In retaliation, Russia redirected its diesel and other fuel exports from Europe to countries like Brazil, Turkey, several nations in North and West Africa, and Gulf states in the Middle East.
Therefore, while the temporary ban on Russian fuel exports may impact Nigeria, Reuters suggests potential compensatory supplies from the Middle East, India, and Turkey.
It is important to note that Russia is the world’s largest diesel exporter, and diesel prices in Nigeria have recently exceeded N1000 per litre. Further constraints on diesel supplies could escalate prices in the country.
However, the Dangote Refinery is anticipated to start diesel refining in October 2023, despite initial delays after its commissioning in the second quarter of the year.
On the other hand, some stakeholders are skeptical about Africa scaling up diesel refining or other fuel production in the near future.
Anibor Kragha, Executive Secretary of the African Refiners and Distributors Association (ARDA), emphasized in a recent interview with S&P Global Commodity Insights that while the Dangote Refinery will significantly contribute to Africa’s energy security by reducing imports, the continent still needs to enhance refining capacity.
Kragha highlighted the accelerating demand growth for diesel and other fuels in Africa, emphasizing the need to focus on storage, distribution capacity, and refining to adequately meet demand.
What you should know
A potential limitation in supply could drive up diesel prices in Nigeria. However, it’s essential to recognize that various factors have been influencing the frequent hikes in diesel prices.
Notably, in June 2023, the Federal Inland Revenue Service (FIRS) notified diesel suppliers in Nigeria of the obligation to remit value-added tax (VAT) on all imported diesel, contributing to inflationary pressures within the country.
Recently, Nairametrics highlighted that Nigerians are currently facing the purchase of diesel at prices ranging from N980 to N1150 per litre.
This increase is attributed to a global diesel shortage resulting from supply constraints, stemming from the decision by Saudi Arabia and Russia to curtail oil production until the end of 2023.
