The situation is a source of some resentment among Nigerians. It is also a situation that Nigerian lubricant producers are trying to address, at least within their own industry. The Lubricants Producers Association of Nigeria is working with the Standard Organization of Nigeria (SON), a government agency, to draft a new tariff regime that would impose a 50 percent duty on imports of finished lubricants. under the current regime, the tariff on lubricant imports is 10 percent.

Discussing the proposal in November at the ICIS African Base Oils and Lubricant Conference in Durban, South Africa, Lupan officer Taiye Williams did not mince words about the rationale for the change.

This increase in the tariff will protect local manufacturers, and the government is in support and helping us out, he said.

Williams, who is managing director of Ilorin, Nigeria-based blender Lubcon, said the current regime makes it too easy for importers to dump products on the Nigerian market. It is quite easy to bring in finished lubes from outside of the country because the tariff is low, he said.

Lupan wants to further help domestic lube blenders by reducing import duties on base oils to 5 percent. Currently they are assessed at a rate of 10 percent, and a lower tariff would reduce procurement costs for blenders. Other Nigerian blenders said they support the proposed changes to lubricant and base oil duties. Chemtech Nigeria Managing Director Adebayo Jimoh, who attended the conference, called it the most helpful thing that the government could do for domestic lube producers.

If you increase the [lubricant] tariff, these products will land [at] higher [prices], he said. The tariff should not be less than 40 percent. Dont forget that in some countries of the world, when you export you are entitled to an export grant of about 40 percent .So if Nigeria puts its import tariff at 40 percent, it will seem as if they are not doing anything.

Williams dismissed any fears that increasing tariff on imported lubes products will affect the quality of the countrys lubricant market by keeping out international brands. He noted that six international companies – ExxonMobil, Total, Forte Oil, Oando, Conoil and MRS – are blending in country under licenses issued by the government. According to him, these companies already have very good standing in the market, and will serve as benchmark for local manufacturers.

If the standards of products manufactured by the local companies are below the [foreign ones] who are also already operating in the country, definitely people will get to see that, and they will know that [the lower quality] products are not good enough, he said. Dont forget also that SON has a set [an engine oil] standard, and they measure all operators within the industry to see if they meet the requirements. He emphasized that internal competition alone is enough to still propel the quality of lubes in the country.

A higher tariff is good for the local industry, said George Morvey, project manager in the Energy Practice at Kline and Co., a consulting firm based in Parsippany, New Jersey, u.S.A. Morvey also addressed the Durban conference and spoke to LubesnGreases afterward. It can definitely protect the local industry and can spur initiatives for more people to get into the business because they dont have to worry about products being imported into the market.

Industry insiders said there is a lack of reliable data about the size of Nigerias lubricant market. According to Williams, the six international companies blending in Nigeria produce 129,000 metric tons of finished lubricants per year. Twenty-one domestic companies are licensed to blend, and their output is 110,000 t/y. Williams said the list of domestic licensees includes Lubcon, A-Z Petroleum, Eterna Oil, Tonimas, Ibeto Petrochemicals, Grand Petroleum, Ammasco International and Honeywel Oil. In addition, between 140,000 and 180,000 t/y of imported base oils go straight into the finished lube market, he said, getting used without the benefit of chemical additives.

Williams pegged total base oil imports at somewhere between 350,000 and 450,000 t/y, but another conference speaker, Optima Energy Base Oils and Lubricants Manager Sudip Shyam, said estimates range up to 600,000 t/y. Nigeria has one base oil plant, but it has not operated consistently for years. Still, the country serves as a base oil hub, with a fraction of imported cargoes subsequently exported to neighboring countries.

Speakers agreed that Nigerias finished lubricant market continues to suffer from a large volume of substandard products that drag down prices while providing poor performance for end users. Shyam said these products are sold mostly in the unorganized sector, often as counterfeits of popular brands.

Some of these suppliers just dye base oils … and sell in bulk, in drums or some even in gallon packs, while some others blend heavier [base oil] grades with lighter ones. Others retail base oils straight as they are. Yes, a market exists for them, especially for application in really old commercial motorcycles and buses, small gen-sets [generators], etc. Its simply a game of cheapest product available.

Sources said the government has tried several initiatives to address the problem but that regulatory lapses have allowed it to persist. At least three agencies have oversight of the industry: the Department of Petroleum Resources, which licenses operators; SON, which sets standards for base oils, lubricants and other products; and the National Agency for Food and Drug and Administration, responsible for regulation and control of chemicals, including lube additives. One failing that speakers cited is roadside trading of engine oils, which has been outlawed by the DPR but remains commonplace in most Nigerian cities.

It is against the law to sell untreated oil by the roadside, Williams said. The law says roadside retailers should [be linked] with a blender and get a registration, but there are still some untreated oils on sale on the streets of various cities in Nigeria.

Regulatory efforts are more directed towards the upstream [sector] than downstream, added John Erinne, chief executive officer of a Lagos blender, Matrix Petro-Chem Ltd., who attended the conference. It is not allowed by law to sell lubricants on the streets or to sell untreated oils, but it happens in Nigeria every day.

Part of the problem, Williams said, is that the licensing system fails to control the flow of base oils, allowing some unadditized volumes to be diverted to the finished products market.

A loophole in the system allows a lube plant owner to import more [base oil] than their installed capacity and also third party marketers to import base oils using the license of plant owner under an agreeable fee, he explained.

Not all of the substandard lubricants are being supplied by Nigerians. Speakers in Durban said a significant portion of imports contribute to the problem, be they unadditized base oils, counterfeits, lubricants made with unrerefined oils or simply products of poor quality. SON is charged with inspecting imported lubes to check that meet the standards that it has set, but Chemtechs Jimoh complained that the agency does not do a good enough job.

According to Williams, of 30 imported brands that SON did inspect during a recent period, more than half met the agencys minimum standard. More than half of those that did not, he said, were imported from the united Arab Emirates.

Jimoh contended that much of the driving public is easy prey for substandard engine oils, partly because the average person does not fully appreciate the lubricant or its job. Some lubes will be labelled API SG, but when they are analyzed you find that they are SD or SE oil, he said. Now the market is not literate enough to differentiate qualities. Some local manufacturers do label correctly. When you [compare] an imported SG product with a locally branded SG product, the price is not going to be the same because the imported product in fact is not an SG but may be an SC. Many consumers, he added, just want to buy a gallon of oil at a particular price, and if they notice that an imported product is cheaper than locally made products, they go for it.

Williams concurred and added that low grades of imported engine oils generally sell for significantly lower prices than domestically manufactured products of the same grade.

Williams said he sees signs of slow progress and that he believes the future holds promise for the sector if regulations can be enforced more strictly. He said, With a lot more regulation the sector will be better, though there has been progress in the last five years. There is need to properly enforce regulations in the sector.