Impending Threat of Nigeria’s Fuel Subsidy Removal on Europe's Refiners
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This week, we discuss the potential implications of Nigeria’s Fuel Subsidy Removal on European Refiners. We also look at the recent coup in Niger.
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Impending Threat of Nigeria’s Fuel Subsidy Removal on Europe's Refiners
The removal of fuel subsidy by the Federal Government of Nigeria in May has led to a decrease in domestic demand and a decline in the regional market for smuggled fuel. This has had a significant impact on European refiners, as Europe has historically relied on exports to North America and West Africa, particularly Nigeria, for its surplus gasoline production.
It is important to note that following the Russia invasion of Ukraine last year, the European refining margins experienced an increase after years of decline caused by increased competition from the Middle East, the United States, and Asia. Since then, benchmark profit margins for gasoline in northwestern Europe have remained steady at around $27 a barrel. These profit margins have been supported by factors such as demand from North America, a shortage of high-quality blending materials, and local refinery outages.
However, experts believe that the recent developments, specifically the removal of fuel subsidies by Nigeria, could put more pressure on European refiners. It is anticipated that the competition with new refineries in the Middle East, which are expanding from their traditional East African markets to West Africa. Furthermore, Nigeria's demand for European oil is expected to continue decreasing as Dangote refinery prepares to come online. This could potentially impact the profitability and market position of European refiners.
Below are some of the recent developments:
Ultimately, West African gasoline imports have dropped significantly. Since the region is one of Europe’s main markets for petrol, the shift in demand patterns has implications for the profitability and operations of European refiners. Therefore, European refiners need to adapt and find ways to remain competitive in the changing landscape of the global refining industry.
Niger Coup: The Seventh in West and Central Africa Since 2020
Last Wednesday, Niger Army backed a coup to oust Niger's President Mohamed Bazoum who was democratically elected two years ago. It marks the seventh coup d'état in West and Central Africa within the past three years, with four military takeovers occurring in neighboring countries Burkina Faso and Mali. The coup leaders dissolved the constitution, suspended all government institutions and closed the nation’s borders. They criticized the government for the deteriorating security situation and economic mismanagement of the country. The consistent reports of military takeovers in West Africa in recent years highlight the following issues:
The upheaval has?raised concerns and garnered international condemnation due to the far-reaching consequences of this coup, which will undoubtedly worsen the existing instability in the region. In response, the Economic Community of West African States (ECOWAS) has issued measures such as border closure, no flight zone and financial sanctions. The regional bloc has also given the coup plotters a week to cede power, with a warning that the use of force has not been ruled out.
In conclusion, the series of military takeovers in West Africa underscores the pressing need for improved governance, the protection of democratic institutions, enhanced security measures, and more effective regional cooperation.
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