Africa needs independent fuel pricing benchmark, says NMDPRA

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The Nigerian Midstream and Downstream Petroleum Regulatory Authority has called for the establishment of an African fuel price benchmark, saying the continent must develop its own regional pricing mechanism to reflect its growing refining capacity, improve market transparency and reduce dependence on foreign pricing indices.

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The authority said every major energy-producing region in the world already operates a recognised pricing benchmark, stressing that Africa should not remain an exception as investment in refining, logistics and cross-border petroleum trade continues to grow.

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The Chief Executive of NMDPRA, Rabiu Umar, made the call in Abuja on Thursday ahead of the second West Africa Refined Fuel Conference. Umar said the conference would focus on attracting investment into the infrastructure and logistics needed to establish a transparent and competitive West African petroleum pricing and trading hub.

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He explained that regional pricing benchmarks are critical because they reflect local market realities rather than relying solely on international indices.

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“Every region in the world today has its own pricing benchmark. Whether you’re talking about Europe, Northwest Europe, or America, they have their own benchmarks. Whether you talk about the Mediterranean or you go to the Gulf countries, everywhere you go, there’s a trading index. It is a global index, but there is a specific index for that region.

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“Why does it exist? Because the process for pricing starts with price discovery, and it takes a lot of elements into consideration. For example, demand and supply, what is the logistics cost to bring the product into that region? All that goes into defining the reference price.”

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According to him, Europe has successfully developed the Amsterdam-Rotterdam-Antwerp trading hub, which serves as the principal pricing and supply centre for much of the continent.

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He said West Africa should pursue a similar model to strengthen regional trade and improve price discovery.

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“If you look at Europe, Europe has ARA, which is Amsterdam, Rotterdam and Antwerp as the trading hub. But the whole of Europe, most of Europe gets supplied from there because that’s a hub. The whole point of having regional pricing is to be able to create a hub where all the activities within a given region are going to be coming out of that place.

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“It has a lot to do with logistics costs, how much it costs to bring the product in, whether you have more supply than demand or more demand than supply. All that goes into improving price discovery and arriving at a price that is right for the market.”

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Umar noted that the growth of refining capacity across Africa had made the establishment of a regional benchmark even more urgent.

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“We are also looking at Africa, in a sense, moving towards its own refining. So, the more we’re able to refine our products, the more relevant it is to have our own reference pricing and then create that advantage, particularly within the West Africa region. Today, we have Lomé. Tomorrow, who knows, we may have that reference price move to Lagos or somewhere around there.”

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The NMDPRA chief stressed that infrastructure remained the biggest enabler of an integrated regional petroleum market, noting that increased refining alone would not guarantee efficient supply without investments in transportation and logistics.

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“Infrastructure in oil and gas is the single most important aspect. You can produce anything you want to produce. If you cannot get it out to the market, there’s a problem. That infrastructure is what moves it across.”

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He cited the West African Gas Pipeline as an example of infrastructure that has enhanced regional energy integration.

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Responding to questions on fuel quality, Umar said Nigeria currently produces cleaner petroleum products than several countries in the region.

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“There has been some work in relation to standardising the specification through ECOWAS as well as the Africa Refiners Association. Once a harmonious level is reached, we’ll then be able to have a single standard in terms of quality.

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“Nigeria doesn’t produce anything above 50 PPM, to the best of my knowledge. Whatever we have produced in terms of what we are able to export is on spec. I would say it’s even of a higher quality than what some of the countries are bringing. In West Africa, you have people doing up to 200 PPM. Nigeria doesn’t do anything above 50 PPM. I can say that confidently.”

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Africa remains one of the world’s largest producers of crude oil, yet prices for most of its petroleum products are largely determined using international benchmarks established outside the continent.

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Stakeholders have long argued that developing an African pricing benchmark would improve price discovery, strengthen regional trade, reduce logistics costs and support the implementation of the African Continental Free Trade Area.

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Nigeria, with expanding refining capacity driven by the Dangote Refinery and other domestic projects, is positioning itself to play a leading role in establishing a West African petroleum trading and pricing hub.

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