July 14, (THEWILL) – Nigeria, once Africa’s largest crude oil producer, finds itself in a paradoxical situation that has persisted for decades. Despite its vast oil resources, the country continues to import nearly all of its refined petroleum products, a reality that stands as a stark reminder of years of mismanagement, corruption, ineptitude and unfulfilled promises.
The latest chapter in this ongoing saga unfolded in December 2023 when the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, announced the “mechanical completion” of repairs at the state-owned Port Harcourt refinery. Nigerians were assured with great fanfare that the facility would soon roar back to life, processing at least 60,000 barrels of crude daily into much-needed petrol and other products and ramping up production to its 210, 000 bpd capacity. However, six months later, the refinery remains silent, unable to produce even a single drop of petrol. The familiar cycle of excuses has begun anew, with talks of “regulatory approvals” and vague assurances that operations will commence “very soon.”
This scenario is all too familiar to Nigerians, who have heard similar promises repeatedly over the years. Nigerians are exhausted, frustrated and tired. The patience of the populace has worn thin with the Nigerian National Petroleum Company Limited, NNPC, and scepticism has replaced hope.
The economic cost of Nigeria’s refining deficit is staggering. In 2021 alone, the NNPC spent N83 billion on maintaining non-functional refineries. Hundreds of billions of naira are still stolen through inflated quantities of petrol imported into the country by the company and the Federal G overnment still has to pay subsidy on this fraud. Simultaneously, billions of dollars in precious foreign exchange are lost annually to fuel imports, leaving the economy perpetually vulnerable and struggling.
The human cost of this dysfunction is even more severe. Ordinary Nigerians bear the brunt through high fuel prices, which ripple through the economy, driving up the cost of food, transportation, and basic goods. The recent removal of fuel subsidies, while economically necessary but implemented without a proper strategy, has only exacerbated this pain.
The persistent failure to revive the refineries over the years, despite billions of dollars invested in repairs, points to deep-rooted issues within the oil sector. The continuous cycle of rehabilitation contracts, each more expensive than the last, yielding little tangible results, points to corruption and crass ineptitude by the management of the NNPC, the Ministry of Petroleum Resources and the Presidency.
A former Governor of the Central Bank of Nigeria and current Emir of Kano, Sanusi Lamido Sanusi, highlighted the scale of this problem as far back as 2013. He pointed out that between 2009 and 2011, the subsidy payments jumped from N291 billion to N2.7 trillion, an increase that could not be explained by any reasonable increase in consumption or population.
The situation has only worsened since then, with subsidy payments reaching between N3.7 trillion to N4 trillion in 2023 under the administration of President Muhammadu Buhari.
The $1.5 billion contract awarded in 2021 for the rehabilitation of Port Harcourt refinery was meant to signal a new dawn. Italian firm Maire Tecnimont was tasked with executing the project within 18 months, promising 90 percent production capacity by the end of 2023. Yet, past midway through 2024, the nation is still waiting for results. It’s the same excuse for the comatose Warri and Port Harcourt refineries.
The impact on Nigeria’s economy cannot be overstated. With an average monthly consumption of 1 billion litres, the country spends approximately N520 billion on petrol imports every month. This translates to an annual import bill of around N6.2 trillion – funds that could be better invested in infrastructure, healthcare, and education.
The dysfunction in the refining sector also has broader implications for Nigeria’s energy security and economic sovereignty. As long as the country remains dependent on imported fuel, it will never be able to develop and will continue to enrich the cartel that steals billions of naira daily through the fuel import scheme of the NNPC.
The situation is particularly frustrating, given Nigeria’s vast oil resources. With proven crude oil reserves of 37 billion barrels, the country should be a net exporter of refined products, not an importer. The failure to harness these resources effectively represents a monumental missed opportunity for economic development and job creation. Why the NNPC is still under government control is frustrating with its very poor record over the years. The Federal Government ought to have sold its majority stake to the private sector and retained 30-40 percent equity.
For starters, Mele Kyari, the current head of the NNPC should be removed from his job for the NNPC’s sustained incompetence since he assumed office in July 2019. It is on record that in over three years the NNPC has not contributed anything significant to the national purse where funds are disbursed to fund both federal and state budgets. Under his watch, crude production has largely remained stagnant averaging 1.2m bpd despite assuming office when production was averaging 1.9m bpd. There has also been no significant investment in the sector from the major oil companies because they have lost confidence in his leadership at the helm of the NNPC.
Leaders must be held accountable for their stewardship. Nigeria has reached a point where we should have zero tolerance for incompetence in public office, just like it is done in the private sector and in countries where the government performs.
Recent challenges faced by the new Dangote Refinery in securing local crude supply further highlight the complexities of Nigeria’s oil sector. Despite the Petroleum Industry Act mandating that international oil companies meet local demand before exporting, there are reports of reluctance to comply. This raises questions about the enforcement of regulations and the alignment of various stakeholders in the industry.
As Nigeria grapples with these challenges, there are calls for a more radical approach to solving the refinery conundrum. Some experts argue that privatisation might be the key to turning around the fortunes of these state-owned facilities. Others advocate for greater transparency and accountability in the management of the refineries, involving regular public audits, clear performance metrics, and consequences for missed targets.
The government’s recent commitment to a market-determined pricing system for crude supply to local refineries is a step in the right direction. However, its effectiveness will depend on robust implementation and monitoring to ensure that both producers and refiners operate on a level playing field.
The path forward requires political will, transparency and a commitment to long-term solutions over quick fixes. It also demands greater public scrutiny and engagement to hold officials accountable for their promises and actions.
Yet, the ongoing crisis in Nigeria’s refining sector can be attributed to two primary factors: a glaring lack of proactive leadership at the highest levels of government and the persistent collusion between those in the oil sector and the cartels stealing our crude and profiting immensely from the continuous importation of refined petroleum products.
The absence of visionary and decisive leadership has allowed this problem to fester for decades. Successive administrations have failed to tackle the root causes of the refinery dysfunction, opting instead for short-term fixes and empty promises. This leadership vacuum has created an environment where corruption can thrive unchecked.
Simultaneously, there exists a powerful network of vested interests that benefit from the status quo. The immense profits generated from fuel importation have created a cartel-like system that resists any meaningful change. These groups, often working in collusion with elements within the oil sector and government, have effectively held the nation’s economy hostage.
This unholy alliance between ineffective leadership and profit-driven cartels has perpetuated a cycle of dependency and economic drain. It has robbed Nigeria of its potential for energy independence and denied its citizens the benefits of their nation’s natural resources.
Until there is a fundamental shift in leadership approach and a breaking of the stranglehold these cartels have on the sector, the refineries in Port Harcourt, Warri and Kaduna will likely remain dormant monuments to mismanagement and lost opportunities and we may never be able to raise crude oil production beyond our current low capacity.
The Nigerian people deserve better. They deserve leadership that prioritise national interests over personal gain and a petroleum sector that serves as an engine of economic growth rather than a drain on national resources.
The revival of Nigeria’s refineries is not just an economic imperative; it is a matter of national pride and a test of the country’s ability to harness its natural resources for the benefit of its people.
As another deadline passes and another promise fades, the question remains: how much longer must Nigerians wait for the basic right of refining their own oil? The answer currently lies in the hands of President Bola Tinubu and his willingness to challenge the status quo for the greater good of the nation.
All Nigerians, especially those with a voice and a platform to amplify that voice, have a duty to speak out on this subject and not relent until action is taken to bring about positive change.
