Nigeria’s Conoil sees Q1 lube profit fall

Nigerian oil products marketer Conoil saw profit from its lubricant unit slide in the first three months of the year as costs surged.

The lube unit’s gross profit of 278.77mn Nigerian Naira ($671,000) in the first quarter fell by 44pc from the same period a year earlier to its second-lowest level since 2016.

Profit slumped as a 41pc rise in lubricant sales lagged the 70pc rise in costs during the first quarter.

The rise in costs reflected a combination of higher base oil prices and freight and logistical costs and the sharp depreciation of Nigeria’s currency versus the US dollar over the past year.

The trend mirrored a similar pattern both in Nigeria and in other markets as blenders struggled to absorb rising costs of many input variables simultaneously.

That challenge looks set to continue as increasingly tight base oil supply supports even higher prices to attract any surplus volume.

The sharp slowdown in base oil exports of Russian origin is also set to have a more direct impact on blenders in Nigeria.

The African country has been a regular destination for supplies from Russia, partly because of their historically lower prices relative to supplies of European origin.

Blenders now face the challenge of securing alternative supplies in a market where availability is increasingly tight.

They face that challenge at a time when margins are increasingly squeezed. Conoil’s gross profit margin of 10.2pc in the first quarter of the year fell from 25.6pc during the same period a year earlier.

Conoil operates a lube blending plant at Apapa, including more than 9,000 kilolitres (7,970t) of base oil storage capacity. It markets its auto and industrial lubricants through its fuel stations and hundreds of distributors throughout Nigeria.