The Nigerian Midstream and Downstream Petroleum Regulatory Authority has urged African countries to establish a regional fuel price benchmark, arguing that the continent needs its own pricing mechanism to reflect its expanding refining capacity, boost market transparency and reduce reliance on foreign pricing indices.
The regulator noted that every major energy-producing region already has a recognised fuel pricing benchmark, saying Africa should no longer be an exception as investments in refining, logistics and cross-border petroleum trade continue to increase.
The Chief Executive of the 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 in the infrastructure and logistics required to establish a transparent and competitive West African petroleum pricing and trading hub.
He said developing a regional pricing benchmark is essential because it would reflect local market realities and supply-demand dynamics, rather than relying primarily on international pricing indices.
“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.
“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.”
According to Umar, Europe has successfully established the Amsterdam-Rotterdam-Antwerp trading hub, which serves as the continent’s principal centre for petroleum supply and price discovery.
He said West Africa should adopt a similar model to strengthen regional trade and create a more transparent and efficient pricing system.
“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 goes into improving market discovery and arriving at a price that is right for the market.”
Umar said the rapid expansion of refining capacity across Africa has made the need for a regional fuel pricing benchmark more pressing than ever.
The NMDPRA chief executive said infrastructure remains the cornerstone of an integrated regional petroleum market, stressing that expanding refining capacity alone would not ensure efficient fuel supply without corresponding investments in transportation, storage and logistics.
“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.”
He cited the West African Gas Pipeline as a successful example of infrastructure that has strengthened regional energy integration and facilitated cross-border gas supply.
“Today we have a gas pipeline going through West Africa. What that means is that you can produce gas in Nigeria and you can collect gas in Ghana, or Togo, or Benin Republic. Without that investment, you will not be able to create the momentum that you require.”
