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Nigeria downstream firms input cost rises

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By Usman Oladimeji

Downstream firms operating costs increased by 22.3 percent in Q1 2023.

Operating costs incurred by firms in Nigeria’s oil and gas downstream sector constitute a concern as it rises year over year. Data from the Nigerian Exchange Group found that total operating expenses by Nigeria downstream firms increased by 24 percent last year. Experts identified inflation, exchange rates, vessel costs, and volatility in the crude-oil market as important challenges on high logistics costs that are significantly impacting the operating costs of large downstream industries in Nigeria.

According to a recent analysis, operating costs for downstream firms in Nigeria increased by 22.3 percent to N14.18 billion in Q1 2023, compared to N11.59 billion recorded in Q1 2022. The study examined data from four Nigerian downstream firms (Total Energies, Eterna, MRS Oil, and Conoil) and found that input costs accounted for 88 percent cumulative revenue of N232.22 billion during the first quarter of 2023, a 37.8 percent increase from N168.48 billion during the reviewed period in 2022.

Total Energies operating costs rose to N8.72 billion in Q1 2023.

In the first quarter of the year 2023, input costs for the firms increased by 37.7 percent, reaching N203.85 billion from N147.99 billion in the first quarter of 2022. TotalEnergies, an multinational energy firm dedicated to providing sustainable products and services, saw its share of total sales rise to 88.9 percent in the first quarter of 2023, up from 85.2 percent in the year before (a 370 basis point increase).

First-quarter 2023 revenue for the firm was N135.28 billion, up by 38.6 percent from N97.61 billion in the previous year. During the period under review, input costs increased to N120.27 billion, a 44.7 percent. Operating costs for Total Energies rose to N8.72 billion in Q1 2023, up 15.3 percent from N7.56 billion in Q1 2022. On the other hand, Eterna’s cost of sales was only 88.6 percent of total revenue in the first quarter of 2023, down from 91.4 percent in the same Quarter of 2022 (a 280 basis point decline).

MRS Oil cost of sales of total revenue drop to 87.6% in Q1 2023.

Eterna’s revenue increased to N31.18 billion in Q1 2023, up 16.3 percent from Q1 2022’s total of N26.82 billion. From the previous period’s N24.52 billion, input costs rose to N27.64 billion, an increase of 12.7%. First quarter 2023 operational expenses for Eterna totaled N1.8 billion, up 59% from N1.14 billion in Q1 2022. MRS Oil, a major distributor of refined products, saw its cost of sales as a percentage of total revenue drop to 87.6% in Q1 2023 from N95.2% in the same period the year prior, a decline of 760 basis points.

The firm’s revenue for the first quarter of 2023 amounted to N30.79 billion, up by 72% from the first quarter of 2022’s N17.9 billion. In the review period, there was an increase in input costs by 58%, from N17.04 billion to N26.98 billion. Operating costs for MRS Oil increased to N1.66 billion in Q1 2023 from N12.06 million in Q1 2022. Lastly, Conoil Plc, a Nigerian petroleum marketing corporation, saw its input cost totaled 82.8 percent of total revenue in the first quarter of 2023, a 630 percent decline from 89.1 percent in the first quarter of 2022.

Conoil cost of inputs reached N28.96 billion, from N23.31 billion.

Revenue for the firm in the First-quarter of 2023 was N34.97 billion, up from 33.7 percent from N26.15 billion in the first quarter of 2022. The cost of inputs reached N28.96 billion, up 24.2 percent from N23.31 billion during the period under review. From N1.83 billion in the first quarter of 2022, Conoil’s operational expenses increased to N2 billion in the first quarter of 2023, a 9.3 percent rise.

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