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Price of lubricants skyrocket as Nigerian firms earn N60.75 billion from oil sales

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The cost of lubricants generally referred to as “engine oil” has skyrocketed by over 70% between January and September 2021. This is according to research carried out by the Nairametrics team across various filling stations in Lagos State.

Specifically, the price of a 4-litre gallon of Mobil 5W30 (semi-synthetic) that was sold for an average of N9,000 at the beginning of the year, now sells within the range of N15,000 and N16,000 while the full synthetic rose to an average of N32,000 from N20,000.

The rise in the cost of lubricants across the country has been attributed to the scarcity of base oil in the global market, which is a major raw material in the production of lubricants. This, in turn, has caused a significant increase in the cost of maintaining and servicing engines in the country.

It is worth noting that the hike is not exclusive to Nigeria, as it is a global issue. It is quite unfortunate, however, that Nigeria suffers from the global scarcity despite being a major producer of crude oil. However, with its inability to refine crude petroleum products in the country, we continue to rely on the importation of base oil, PMS amongst others, which are by-products of crude oil.

Data from the National Bureau of Statistics, reveals that Nigeria imported lubricants worth N9.03 billion in the first half of the year, representing a 640% increase compared to N1.22 billion recorded in the comparable period of 2020.

Price highlights

Data tracked by Nairametrics on the prices of lubricants from Total Energies, shows that the price of a keg of Azolla zs68 rose by 72.2% from N18,000 recorded as of the end of December 2020 to sell for an average of N31,000 in September 2021.

Also, a Drum of Rubia HD 200, which sold for an average of N165,000 to N170,000 by December last year, now sells within N260,000 and N275,000 on average, indicating a price increase of over 60%.

Similarly, a keg of Golden Super SAE 40 P1, now sells for an average of N1,750 compared to an initial range of N900 and N1,000, representing an increase of at least 80%.

Crown H.Duty SAE 40 P4 currently sells for an average of N6,550, while Quatro HDX Maxima P25 sells for an average of N389,000 in Lagos State.

Oil firms earn N60.78 billion from lubricant sales

An analysis of the earnings generated by five of the listed oil and gas firms in the country shows a significant increase in the revenue generated from the sales of lubricant products and grease in the first half of the year.

Total Energies recorded a 62.38% increase in its lubricant revenue from N22.96 billion generated in H1 2020 to N37.29 billion in the period under review.

Similarly, Eterna Plc grew its lubricant revenue by a whopping 90.78% from N3.68 billion to N7.01 billion in H1 2021, while Ardova Plc posted a sum of N11.23 billion as revenue from the sales of lubricant product, indicating a 42.82% surge from N7.8 billion generated in the comparable period of 2020.

However, MRS Oil was the only company amongst the five companies under consideration, that posted a decline in lubricant revenue in the review period.

What experts are saying

Engr. Anu Omotosho, a lubricant specialist at Total Energies explained that the increase in the cost of lubricant in the country is majorly due to the scarcity of the primary production material, which is base oil. Speaking further, Engr. Anu said, “due to the covid-19 lockdown and most European countries, base oil became scarce and as such, Nigeria could not import, hence affecting the production levels.”

He also highlighted that before the scarcity of the highly coveted lubricant product, inventories were already low in Nigeria and only very few firms had base oil, which resulted in a shortage of supply as opposed to a growing demand for lubricants.

Another respondent, Mr Abdul, a manager of one of the major filling stations in Ikeja explained that they have a low inventory of lubricants, especially for diesel engines due to shortage of supply from their plants. He highlighted further that the shortage of supply has caused a significant increase in the price of lubricant across all stations in the country.

Opeoluwa Dapo-Thomas, a global oil market analyst said: “As you know, COVID led to a lot of disruptions in the global economy, we are seeing lockdowns, remote working, and a decline in holidaying and business travel. With all this development, there’s been a decline in the demand for fuel as global oil refineries are simply not producing due to the huge stockpiles all around the world.

Base oil is a component of refined crude oil and if refining operations are down, the refined products will be scarce. As a consequence, base oil production has been affected and this shortage has led to a sharp spike in demand and rise in global lubricant costs. What we need now is for fuel demand to go up, so that more base oil can be produced as a result of refining, then we can get our lubricants.”

On the other hand, in a discussion with Mr Abiola, a car owner in Lagos who uses lubricants regularly, he explained that the cost of lubricants has doubled in recent times compared to what was previously obtainable, which has affected the cost of maintaining and servicing his car. According to him, he buys a 4-litre gallon of Mobil 5W30 for an average of N15,000 compared to the beginning of the year, when it sold for an average of N9,000.

Bottom line

The increase in the price of lubricant will further heighten the inflationary pressure in Nigeria, with core inflation currently at 13.41% in August 2021, compared to an average of 10.29% in 2020. Notably, the increase in engine oil prices will further affect the cost of maintaining and servicing engines in the country.

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