Nigeria’s oil marketers record massive gains from subsidy removal

Nigeria’s major oil marketers reported record profits following subsidy removal, marking a 146% profit surge and a more competitive market landscape.

In a landmark shift for Nigeria’s oil sector, major oil marketers have reaped substantial financial rewards following the Federal Government’s decision to end petroleum subsidies.

This policy change has brought Nigeria’s fuel market closer to international standards, allowing a more market-driven pricing structure that has led to record-breaking profits for the country’s key petroleum players.

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In the first three quarters of 2024, four of Nigeria’s prominent oil marketing companies—TotalEnergies Marketing Nigeria, MRS Oil Nigeria, Eterna Plc, and Conoil Plc—reported combined revenues of approximately N1.3 trillion from petroleum product sales to consumers.

This revenue increase highlights the considerable impact of the subsidy removal, enabling a new phase of profitability for the sector.

Despite the considerable expense of importing petroleum products, these companies spent N833.86 billion on fuel imports, achieving a gross profit of N465.92 billion from petrol sales.

According to the latest reports listed on the Nigerian Exchange, the revenue surge aligns with the substantial rise in petrol prices, which moved from N200 per litre in May 2023 to above N1,060 per litre by November 2024.

Following this market adjustment, the four firms posted a combined profit after tax of N45.3 billion—a 146% year-on-year increase from the N18.5 billion recorded in the same period in 2023.

TotalEnergies led in import spending, with N234.68 billion allocated to fuel imports, marking an 85% increase from N126.88 billion in 2023.

Revenue from fuel sales surged to N634.1 billion, pushing gross profit to N399.4 billion, a 100% rise from the previous year.

Similarly, Conoil Plc reported a significant financial boost, with N220.53 billion spent on fuel imports, reflecting a rise from N117.13 billion in 2023.

Its revenue rose by 83% to N244.53 billion, with a 45% increase in gross profit. MRS Oil and Eterna Plc also reported impressive results, recording 77.9% and 125.2% gross profit increases, respectively.

The elimination of subsidies has, however, impacted the operating costs for these companies. Higher market-driven fuel prices have raised working capital requirements by more than 180%, leading to increased financing costs for fuel purchases.

The firms acknowledged that while deregulation has improved revenue, it has also necessitated reliance on additional credit to manage higher fuel costs.

“Since the deregulation policy took effect, our working capital requirements have soared by over 180%,” stated one of the marketers.

“This has significantly impacted our bank credit lines for product purchases, even though our average monthly revenue has grown by approximately 200% compared to figures before deregulation.”

The oil firms also highlighted that sales volume dropped by around 40% in the initial three months following subsidy removal, largely due to the sharp increase in pump prices. However, they reported a notable recovery in sales volume in the final quarter of the year.

While oil marketers have benefited, several manufacturing companies have struggled to absorb the rising costs of energy, particularly in an environment where operational expenses are heavily tied to fuel.

Manufacturers such as Dangote Cement, BUA Foods, and Dangote Sugar reported that their fuel expenses increased by N282.92 billion, totalling N550.36 billion over nine months.

Furthermore, the four leading oil marketers revealed that they are owed N36.56 billion in bridging claims by the Federal Government through the Nigeria Midstream and Downstream Petroleum Regulatory Authority.

These claims, which cover transportation costs for distributing fuel across Nigeria, highlight additional financial pressures within the sector.

As Nigeria’s oil market adapts to this new reality, industry analysts suggest that profitability will likely stabilise, although market dynamics remain closely linked to the government’s regulatory stance and international energy prices.

The new policy environment has sparked debate on how best to balance corporate gains with consumer affordability and economic sustainability.

This year has underscored how strategic shifts like subsidy removal can radically alter industry profitability, market structure, and consumer costs.

Moving forward, Nigeria’s major oil marketers and policymakers alike will be watching closely to gauge the broader economic impacts of this transformative change.