TotalEnergies Marketing Nigeria (TMN) saw profit from its lube operations fall in the final three months of last year as sales fell faster than costs.Costs fell amid a drop in feedstock base oils prices.The steady depreciation of Nigeria’s currency negated some of the benefit of the lower feedstock costs.Nigeria’s economy also likely slowed further in the fourth quarter of the year, curbing demand for lubricants.The economy already grew in the third quarter at its slowest rate since the beginning of 2021.The combination of currency and economic weakness is likely to continue through 2023.TMN’s gross profit of 6.68bn Nigerian Naira ($14.5mn) in the three months to end-December fell by 11pc from N7.51bn during the third quarter of the year.Profit fell as a 5pc drop in sales outpaced the 3pc fall in costs during the same period..Costs eased as rising surplus base oils supplies in Europe put pressure on prices.Europe’s Group I base oils prices fell by more than 20pc in the fourth quarter of last year from the previous three months.The improving availability and lower prices for supplies from Europe also curbed Nigerian blenders’ need to seek shipments from the US..Europe's Oct exports to Nigeria fall.A swathe of supplies from the US moved to Nigeria in first-half 2022. The shipments covered for unexpectedly tight supply and high prices in the European market during that period.Supply from Europe could tighten again in 2023 as the EU’s ban on Russian base oils imports forces regional blenders to seek Group I supplies from other sources. The ban comes into effect in early February.Any rise in base oils prices over the coming months would compound a likely further depreciation of Nigeria’s currency versus the US dollar.Nigeria’s official currency exchange rate to the US dollar already fell by 4pc in the final three months of last year, countering some of the benefit of the drop in base oils prices. It depreciated further in January.The gap between the official and parallel exchange rate also remained unusually wide in the fourth quarter of last year amid increasingly tight foreign currency liquidity.The parallel exchange rate weakened further in January, magnifying the cost of imports in local currency terms.Weak demand and the limited drop in costs kept TMN’s fourth-quarter profit margin under pressure. Its gross profit margin of 23.8pc fell from 25.4pc in the third quarter of the year to the lowest in more than two years..US’ Nov base oils exports to Africa rise
