Nigeria has called the establishment a native African reference price benchmark for refined petroleum products, a move aimed at ending the continent’s reliance on foreign pricing indices and reflecting local market realities.
Chief executive officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) Rabiu Umar stated this in Abuja on Thursday during a media briefing ahead of the second West Africa Refined Fuel Conference.
Umar noted that while Africa produces significant volumes of oil and gas, yet much of the pricing for our commodities is determined outside the continent.
“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.
“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,” Umar said.
He explained that Europe had successfully developed the Amsterdam-Rotterdam-Antwerp trading hub, which serves as the principal pricing and supply centre for much of the continent.
Emphasising the need for West Africa to pursue a similar model to strengthen regional trade and improve price discovery, the NMDPRA boss noted that the growth of refining capacity across Africa had made the establishment of a regional benchmark even more urgent.
“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 a 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.
“It has a lot to do with logistics cost, how much it costs to bring in the product, whether you have more supply than demand or more demand than supply. All that that goes into improving market discovery and arriving at a price that is right for the market,” he said.
