Nigeria faces lubricant supply squeeze as global base oil imports dry up

Nigeria may face a lubricant supply squeeze in the coming months as tightening global base oil supplies and rising prices limit imports into West Africa. According to a report by global energy and commodity intelligence firm Argus, the last large shipments arrived in March, and replenishment cargoes are unlikely to be available from exporting countries throughout the summer.

Heavy reliance on imported base oils

West Africa remains heavily dependent on imported base oils, with average annual imports standing at about 135,752 tonnes over the past five years. Gabriella Twinning, Argus’ Head of Base Oil Pricing, stated: “West Africa is a net importer of base oils, with average imports of around 135,752 tonnes annually over the past five years.” The Dangote refinery expansion includes a base oil production unit, but the facility has yet to commence operations, leaving the region dependent on imports.

Global supply disruptions hit home

The report said lower availability of base oils and rising global prices linked to disruptions caused by the US-Iran conflict are reducing offers into the West African market despite the announcement of a peace deal. Twinning stated: “Lower availability of base oils and rising global prices due to the continued disruption associated with the US-Iran war are curbing offers into the West African market despite a peace deal announcement.”

Explaining the supply constraints, Twinning said: “Bulk European Group I volumes, usually used for engine, marine and industrial oil lubricants and greases, are unavailable following PK Orlen’s five-week maintenance shutdown and restart at the end of May. Bulk volumes out of the US are also limited as refiners service domestic demand and stockpile volumes for hurricane season. Crude changeovers at some Group I US refineries are also hampering output.”

Alternative grades and higher prices

The report noted that Nigerian buyers could switch to alternative grades where product formulations permit. “Nigerian buyers could purchase Group II heavy grades as alternatives to Group I where formulations allow. These are more readily available outside Asia. However, Asian sellers are prioritising higher prices from blenders in South America,” Twinning said. She further stated that volumes from Russia had also declined as several refineries undergo repair works.

According to her, higher spot prices are also discouraging purchases into the region. “Rising spot prices to record highs in June since the start of the conflict will also make any cargo unattractive to West African buyers given the complicated payment process,” Twinning said.

What this means for the naira and Nigerian businesses

Warning of the implications for the local market, Twinning added that West African blenders would need to increase ex-tank prices and bid levels to compete with buyers in other regions. “Demand is rising despite the rainy season, when transport and logistics typically slow. This is because no replenishment cargoes have arrived since March and tanks are running dry,” she noted. For Nigerian consumers and businesses, this means higher lubricant prices in the coming months, with potential knock-on effects on transport and industrial costs as the naira faces additional pressure from rising import bills.