Nigeria’s oil revenues suffered a shock in recent weeks as about 20 cargoes hibernated on the high sea without buyers due to social setbacks in countries that are, at present, the major buyers of the country’s crude oil. France, one of the major targets of Nigeria’s crude, was embroiled in an industrial strike over pension, an action that halted activities in its refineries. On their part, refineries in The Netherlands were said to be undergoing seasonal turn-around-maintenance (TAM), hence they could not accept supplies of crude oil from Nigeria.
India and China, among the 10 biggest buyers of Nigeria’s crude oil, are also looking in the direction of Russia, where they now purchase crude oil at discounted rates and make payments in currencies other than the United States dollar.
The foregoing situation is a signal to the Nigerian National Petroleum Company Limited (NNPCL) that it cannot be complacent in its drive to market the country’s prime commodities. It must be involved in strategic planning for marketing its oil and gas products in such a manner that temporary disruptions, as have occurred in France and The Netherlands, or even shocks that accompany conflicts, like the Russian invasion of Ukraine, do not leave the economy stranded.
In 2020, China ranked as one of the major buyers of Nigeria’s crude oil, having purchased about one billion barrels, but supplies to China dropped to about 600 million barrels in 2021. Since Russia’s invasion of Ukraine, Chinese crude oil import from Nigeria dropped drastically, though it was still one of the top 10 buyers of the commodity. China imported about 5.62 million barrels of crude oil per day from Russia in February this year.
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Also, India which used to be one of the top five crude oil importers from Nigeria has cut its demand, as it increased its import from Russia by about 1.7 million barrels per day, almost the quantity that Nigeria produces daily.
Though the European Union has imposed sanctions on oil and gas from Russia, restricting the purchase of the commodities from the Eastern European country, Russia has found a way around the punishment, with a long term plan that has defied European Union and American sanctions. Russia now sells its products through proxies – China, India and Turkey. Under this arrangement, Russia crude oil is refined and sold to even countries that have vowed to punish Russia for invading Ukraine. This is the benefit of long-term and strategic marketing.
The NNPCL must be strategic about marketing Nigeria’s oil and gas. For one, Russia’s invasion of Ukraine has led to changes in the world economy, with all sorts of re-alignments taking place between Europe, Asia and the Middle East. It is not clear how long the Russia-Ukraine war shall endure, but the economic realities that it has given birth to may not fizzle out very soon.
China, India, and Turkey are raking in a lot of income from the cheap crude oil, gas and coal they import from Russia. They may engage in measures that would deepen this trend, especially because they have found other ways of trading without the US dollar. It was not strange, therefore, that the Organisation of Petroleum Exporting Countries (OPEC) had to cut oil production recently in order to contain the downward slide of the international market price of crude oil.
We, therefore, call on the NNPCL to come up with strategies that would attract new markets for its crude oil. Nigeria must be proactive. Apart from looking for new buyers of its crude oil, NNPCL must ensure that its refineries begin to produce refined products in the second quarter of this year. With dwindling revenues from crude oil, NNPCL should put in place measures that will halt the use of hard earned foreign exchange for the importation of refined products.
The oil and gas company should ensure that local petroleum products are sourced from refineries in Nigeria, instead of importing them from Europe. Also, we call on the NNPCL to target export of refined products instead of crude oil alone, as Nigeria will realise maximum benefits from export of refined petroleum products more than it does from the export of crude oil. If Nigeria’s refineries are effective, NNPCL could export refined products at competitive prices to markets in Africa, thereby deepening trade relations with its neighbours.
The Nigerian government should also consider a long-term strategy on how our oil can be used for industrial take-off at home, to power industries and boost businesses. After all, most countries that purchase our crude use the product to power their industries.
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