… warns against concentration risk
“…government must closely monitor prices and be ready to intervene if the Middle East crisis persists”
Oredola Adeola
Mr. Joe Nwakwue, Partner at Zera Advisory and Consulting, has cautioned against concentration risk in Nigeria’s downstream petroleum sector, advocating for a “contestable market” that allows continued importation of petroleum products to guarantee alternative supply sources.
Nwakwue made this known during a virtual webinar organised by the Major Energy Marketers Association of Nigeria (MEMAN) in partnership with S&P Global, titled “West African Market Resilience in the Face of Geopolitical Situation.”
He explained that maintaining a competitive—or “contestable”—market, supported by strong regulation, policy clarity, and sustained access to multiple supply sources, is critical in navigating the current period of volatility, rising prices, and structural shifts in the global energy market.
According to him, such a framework is necessary to ensure that consumers are protected from the adverse effects of concentration risk.
Nwakwue further emphasised that Nigeria is not immune to global oil price volatility, noting that the country’s Bonny Light crude is benchmarked against Brent crude.
“Whatever happens to Brent will also affect how Nigerian crude oil is traded in the global market,” he said.
Speaking on the ongoing geopolitical tensions in the Middle East, he noted that mechanisms such as the Naira-for-crude initiative could be leveraged to provide discounts and shield domestic refining from the volatility of international markets.
“I am not aware that we have importation challenges; rather, we have uncertainty around regulatory policies. We need to be very clear on regulations,” he stated.
He stressed that allowing importation is essential to maintaining a contestable market, ensuring that dominant players operate as though they are in a competitive environment.
Nwakwue warned that petrol remains central to Nigeria’s economy and that the government must closely monitor prices and be ready to intervene if the Middle East crisis persists.
“If the pump price of petrol rises to about N2,000 per litre, it will significantly impact inflation and could reverse the economic gains recorded in recent times,” he said.
He urged the government to determine price thresholds and design temporary intervention measures that prevent severe economic disruption without reverting to the traditional subsidy regime.
“There are more effective ways to manage this than the old and much-abused petrol subsidy, which the current administration has removed,” he added.
Nwakwue suggested that crude-for-naira arrangements by the Nigerian National Petroleum Company (NNPC) could be used to provide larger discounts to petroleum producers, thereby cushioning the domestic market from external shocks.
Highlighting the broader economic implications, he noted that a significant portion of Nigeria’s alternative and industrial power generation—estimated at about 60 percent—relies on diesel.
He warned that rising diesel prices could force manufacturing activities to shut down if not properly managed.
“The government must ensure that manufacturing does not grind to a halt due to escalating diesel prices linked to the Middle East crisis,” he said.
He added that any intervention should be carefully designed with clear entry and exit strategies, stressing that such measures must be temporary and not perceived as a reintroduction of fuel subsidies.
“There must be clearly defined timelines and conditions for both implementation and withdrawal once the objectives are achieved,” Nwakwue stated.
