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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Nigeria downstream firms input cost rises – Downstream firms operating costs increased by 22.3 percent in Q1 2023. – Express your point of view.
The actual reasons for the rise in operating costs for downstream firms in Q1 2023 would depend on specific industry dynamics and market conditions. However, considering the factors like rising fuel prices, exchange rate fluctuations, regulatory changes, inflation and security challenges can help provide perspective on why such an increase may have occurred.
I can say exchange rate and inflation are the main factors contributing largely to the rising operating cost for the downstream firms. This issue is persistent and needs to look into to prevent further rises.
It’s concerning to hear that the operating costs for downstream firms in Nigeria have gone up so much in just one quarter. I hope that the increase in costs doesn’t negatively impact the businesses too much and that they are able to find ways to adjust to the changes. It’s important to keep in mind the effects that these types of changes can have on the economy and the people who rely on these businesses for their livelihoods.
The downstream firms putting cost of fuel means fuel price will increase again. It is just unfortunate at this point. Everything is just increasing. I hope the price won’t get bad to the extent people won’t use fuel again.
The real causes of the increase in operating costs for downstream companies in Q1 2023 will be determined by the dynamics of the individual markets and industries. However, taking into account variables like growing fuel costs, fluctuating exchange rates, regulatory changes, inflation, and security issues can help put the increase in perspective.
The news that Nigerian downstream companies’ operating expenses have increased significantly in just one quarter is alarming. I’m hoping that the businesses are able to find ways to adapt to the changes and that the cost increase doesn’t have a significant negative effect on them
Nigeria downstream firms input cost rises, The underlying factors driving the uptick in operating costs for downstream businesses in Q1 2023 will be defined by the dynamics of the various marketplaces and industries. But putting the rise in prices into perspective can be accomplished by considering factors like rising gasoline prices, shifting exchange rates, changing regulations, inflation, and security concerns.
No other things can be responsible for the rise in the cost of operations in the firms in Nigeria’s oil and gas downstream sector other than inflation, exchange rates, vessel costs, and volatility in the crude-oil market. Federal Government need to critically look at these areas and correct every forms of anomaly before grow worst.