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Challenges and opportunities in Nigerian marine fuels market 14 Aug 2025

Nigeria’s marine fuels market, a critical cog in the global maritime supply chain, is a dynamic sector shaped by the interplay of global energy trends, domestic economic policies, and a complex regulatory landscape. With its 853-kilometre coastline and strategic ports in Lagos, Port Harcourt, and Bonny Island, Nigeria is a pivotal player in the bunkering industry, supplying fuel to vessels that power international trade. 

Yet, the sector grapples with multifaceted challenges, from insecurity to infrastructure deficits and regulatory hurdles, even as it brims with opportunities for growth, driven by rising maritime trade and global environmental mandates. This article explores the intricacies of Nigeria’s bunkering industry, its challenges, and the pathways to unlocking its vast potential.

Market Structure and Key Players

Nigeria’s marine fuels market is a complex ecosystem driven by both domestic demand and international trade. The country’s strategic position along major shipping routes and its status as a leading crude oil exporter make its ports critical bunkering hubs. Lagos, with its Apapa and Tin Can Island ports, handles the lion’s share of bunkering activity, followed by Port Harcourt and Bonny Island, which serve offshore oil and gas operations. According to the Nigerian Ports Authority (NPA), Lagos ports alone processed over 1.2 million TEUs (Twenty-foot Equivalent Units) in 2024, underscoring their significance in regional maritime trade.

The market is powered by a range of stakeholders, each playing a distinct role. They include NNPC Ltd., a state-owned energy company, which oversees quality control, ensuring bunker fuels meet international standards for domestic and foreign vessels; Petroleum Products Pricing Regulatory Agency (PPPRA), which regulates fuel pricing in alignment with global oil price fluctuations and domestic policies, balancing affordability and profitability; and the Nigerian Maritime Administration and Safety Agency (NIMASA), which enforces maritime safety and environmental regulations, ensuring compliance with International Maritime Organisation (IMO) standards, such as the 2020 Sulfur Cap, which limits sulfur content to 0.50% m/m.

Others are independent marketers and suppliers, which include companies like GAC Nigeria (offering LNG bunkering), Techno Oil Ltd. (supplying low pour fuel oil), Plus Petroleum (providing marine fuel and gasoil), and TotalEnergies Marketing Nigeria (supplying marine oils like AURELIS TI 4055), who form the backbone of fuel supply and distribution; ship owners and operators, the end-users driving demand, ranging from global shipping giants to local operators servicing Nigeria’s oil and gas sector; and the private bunkering operators, who facilitate offshore and port-based fuel supply, often operating specialised bunkering vessels.

The interplay of these players creates a vibrant, yet challenging, market, where efficiency and compliance are critical for success.

Types of Marine Fuels in Nigeria

The Nigerian marine fuels market offers a range of bunker fuels, each catering to specific operational and regulatory needs. They include Heavy Fuel Oil (HFO), the traditional choice due to its cost-effectiveness, but with the HFO’s high viscosity and sulfur content making its less environmentally friendly and its use is declining due to stricter emissions regulations; Intermediate Fuel Oil (IFO), offering a compromise between cost and environmental impact, given its lower sulfur content and viscosity, compared with HFO; and Very Low Sulfur Fuel Oil (VLSFO), a cleaner alternative, widely adopted in Nigeria to meet global emissions standards, which has gained traction since the IMO 2020 Sulfur Cap.

The Marine Gas Oil (MGO) is a refined, low-sulfur fuel used in regions with stringent regulations or for modern vessels with cleaner engines. The Liquefied Natural Gas (LNG) is an emerging eco-friendly option, which emits significantly less sulfur and greenhouse gases. Companies like GAC Nigeria are pioneering LNG bunkering, though adoption remains limited due to infrastructure constraints. Biofuels and other alternative fuels are still nascent in Nigeria. These fuels represent the future of sustainable bunkering, with global trends pointing toward methanol and hydrogen-based options.

The shift toward cleaner fuels is driven by global regulations and Nigeria’s commitment to MARPOL Annex VI, though enforcement challenges persist, as noted by industry reports from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Regulatory and Compliance Landscape

Nigeria’s bunkering industry operates under a robust yet labyrinthine regulatory framework. Key regulations include the IMO 2020 Sulfur Cap, which mandates a maximum sulfur content of 0.50% m/m, pushing demand for VLSFO and MGO. Compliance is monitored by NIMASA, though enforcement gaps remain, due to limited resources. The NMDPRA oversees licensing and ensures bunkering operations align with safety and quality standards. 

The Coastal and Inland Shipping (Cabotage) Act, 2003 regulates bunkering vessels, requiring registration with NIMASA and restricting cabotage trade to Nigerian-owned vessels to promote local participation. And the PPPRA sets pricing guidelines and monitors the Petroleum Support Fund to stabilise fuel costs.

Despite these regulations, inconsistent enforcement and bureaucratic delays in licensing create operational bottlenecks. For instance, a 2024 report by the International Chamber of Shipping highlighted that Nigeria’s port state control inspections often face delays due to understaffed regulatory bodies, impacting compliance timelines.

Supply Chain and Infrastructure Challenges

The transition to low- or zero-carbon fuels poses significant logistical and infrastructural challenges for Nigeria’s bunkering sector. According to a joint study by University Maritime Advisory Services (UMAS) and the Energy Transitions Commission (ETC), 87% of the investment needed to decarbonise global shipping by 2050 will go toward land-based infrastructure and fuel production. For Nigeria, this translates to urgent needs. The country has limited bunkering infrastructure. Most of the nation’s ports lack facilities for alternative fuels like LNG or methanol, requiring investments in storage tanks, pipelines, and specialised bunkering vessels.

The country also has geographical constraints, as fuel production is often concentrated in specific regions, forcing vessels to travel longer distances for bunkering, increasing costs and emissions. Fuel quality inconsistency is another challenge to be addressed. Variations in fuel quality across ports can cause engine issues, necessitating rigorous quality control measures. Also, logistical complexities, as in offshore bunkering, especially for LNG carriers, involves specialised transfer operations that are sensitive to weather and sea conditions. And the issue of high capital costs needs to be addressed as well. Transitioning to cleaner fuels requires significant investment in vessel retrofitting and infrastructure upgrades, a challenge for cash-strapped operators.

The International Energy Agency (IEA) estimates that 15% of global energy-related greenhouse gas emissions come from oil and gas supply chains, with methane leaks being a key issue. For Nigeria, addressing these emissions is critical to aligning with global standards and maintaining competitiveness.

Market Opportunities and Growth Drivers

Despite its challenges, Nigeria’s bunkering sector is poised for growth, driven by maritime trade expansion. For instance, the African Continental Free Trade Area (AfCFTA) is boosting intra-African trade, increasing vessel traffic through Nigerian ports. The NPA reported a 10% rise in port calls in 2024 compared to 2023.

Nigeria’s offshore oil and gas fields, such as the Egina and Bonga fields, are also driving demand for bunkering services to support vessels and tankers. Nigeria’s strategic location along major shipping routes makes it a natural bunkering hub for West Africa. And recent developments, such as TotalEnergies’ expansion of bunkering terminals in Lagos, signal growing private-sector commitment to infrastructural investment in the sector.

Challenges and Risks

Nevertheless, Nigeria’s bunkering sector faces significant headwinds. They include insecurity, with oil theft and pipeline vandalism by militant groups disrupting supply chains and causing environmental damage. A 2024 report by the Nigeria Extractive Industries Transparency Initiative (NEITI) estimated losses totalling $3.3 billion annually due to oil theft.

Inadequate infrastructure in storage and transportation networks lead to supply inconsistencies and delays. For example, only 30% of Nigeria’s ports have modern bunkering facilities, per NPA data. Nigeria faces financial constraints in meeting these needs. High capital requirements for vessels and infrastructure deter investment, with local banks hesitant to finance due to perceived risks.

The elephant in the room is regulatory bottlenecks. Cumbersome licensing processes and inconsistent enforcement disadvantage compliant operators, fostering a shadow market for illicit bunkering.

Conclusion and Recommendations

Nigeria’s marine fuels market is at a crossroads. Its strategic location, robust oil and gas sector, and growing maritime trade position it as a potential leader in West African bunkering. However, insecurity, infrastructure gaps, and regulatory challenges threaten to stifle growth. 

To unlock the sector’s potential, stakeholders must adopt a multi-pronged approach. They must invest in infrastructures including modern bunkering terminals, storage facilities, and pipelines to support cleaner fuels like VLSFO and LNG. Public-private partnerships can bridge funding gaps. 

There is also the need to enhance security. Measures against oil theft and vandalism through coordinated efforts between NIMASA, the Nigerian Navy, and private security firms should be strengthened. The regulatory regime should also be streamlined. Regulators should simplify licensing and ensure consistent enforcement to create a level playing field. Digital platforms for real-time compliance monitoring can reduce fraud.

Adoption of technology, including AI-driven tools for sanctions screening, risk assessment, and market intelligence, can enhance efficiency and competitiveness. It is also important to promote cleaner fuels. In this regard, the adoption of VLSFO, LNG, and biofuels should be incentivised through subsidies and tax breaks, in pursuit of global decarbonisation goals.

By addressing these challenges and seizing emerging opportunities, Nigeria can transform its bunkering sector into a cornerstone of its maritime economy, driving sustainable growth and global competitiveness.

Joy Dimka is Senior Legal Officer at the Nigerian Shippers' Council.