Nigeria’s absence of crude oil refineries and reliance on imported raw materials for lubricant manufacturing has significantly impacted engine oil prices. The foreign exchange crisis has further escalated costs, pushing the price of one liter of lubricant to an average of N6,500. This translates to an annual expenditure of N3.7 trillion, given Nigeria’s consumption of 583 million liters of lubricant oil per year.
Despite having over 58 blending facilities, the high cost of production has led to a market flooded with fake and adulterated engine oil, posing a threat to Nigeria’s 11.8 million vehicles. The cost of synthetic lubricants has skyrocketed. For instance, one liter of synthetic Mobil One lubricant now sells for about N11,000, while Mobil Super 2000, previously N800 per liter, is now N6,900. Similarly, Shell Rotella T6 synthetic oil, once N5,000 per liter, now trades for about N10,000.
Dangote Refinery and several modular refineries are operational, yet the rehabilitation of Nigeria’s three major refineries in Port-Harcourt, Warri, and Kaduna remains incomplete. Consequently, the country imports around 380.36 million liters of base oil annually for local blending. Despite efforts, the reliance on imports, especially synthetic lubricants, continues to inflate prices.
A motorist, Abdullaziz Tukur, servicing his Mercedes E63 Benz in Abuja, spent N128,100 on nine liters of Mobil One Emission Systems Protection fully synthetic engine oil, N8,000 on oil filters, and N3,000 on service charges. The total cost amounted to N139,100. Similarly, Adanma Okoro, whose Toyota Corolla requires four liters, paid N18,200 for the base oil version of Mobil, along with N2,500 for an oil filter and N3,000 for service charges, totaling about N23,700.
Base oil prices on the international market range from $950 to $1,300 per metric ton, depending on the grade. Prices have remained relatively stable due to crude oil prices but have been influenced by stricter environmental regulations and disruptions in global trade, especially due to geopolitical tensions.
For Nigerian operators, the exchange rate crisis exacerbates the situation. By the end of 2022, the naira traded at N448 per dollar compared to N411 per dollar at the end of 2021. By the end of 2023, the rate had soared to N907 per dollar, and as of last Friday, it stood at N1,482 per dollar. Consequently, if a metric ton of base oil was selling at $950 in 2022, operators would spend N425,600 per ton. Currently, at the same price, it costs N1.4 million per ton.
Amechi Dibia, Managing Director of Masters Group, stated that most Nigerian refineries prioritize Premium Motor Spirit (PMS) and diesel, despite the significant demand for lubricants. The only refinery with a base oil facility, Kaduna, is obsolete. He highlighted that the importation of base oil and other raw materials escalates costs amid the foreign exchange crisis.
Othman Yusuf, National President of the Nigerian Association of Road Transport Owners (NARTO), revealed that servicing a truck now requires about N100,000 due to increased lubricant costs. This rise in costs has also driven up haulage expenses across the country. “You can’t operate without engine oil. Every increase in the price affects your cost of operation. This is giving us serious concerns. We need at least 50kg of oil to service a truck, which is over N100,000,” he said.
Professor Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria (CIBN) and an economics professor at Babcock University, explained that engine oil is a derivative of oil refining, producing PMS, AGO (diesel), and DPK (kerosene). The imported base oil product’s landing cost is influenced by the domestic exchange rate. Ajibola stressed that resuscitating local refineries is crucial. He advocated for the turnaround maintenance of Port Harcourt and Kaduna refineries and the development of private refineries to provide essential ingredients for local engine oil blending.
“This will make various grades of the product available to end users in Nigeria at affordable prices. Engine oil of various grades is an essential daily need for light and heavy industries, automobile, and mechanical engine users. Hence, it is quite essential to the life of an average Nigerian,” Ajibola concluded.
