Tinubu must Intensify domestic refining drive to end Imports
Recent developments in Nigeria’s downstream oil sector underscore the nation’s dilemma of suffering despite its vast resources. While the Nigerian National Petroleum Company Limited has committed to supplying six million barrels of crude to the Dangote Refinery by December, five smaller domestic refineries are struggling to begin production and have expressed their frustrations.
The prices of refined petroleum products have continued to rise due to ongoing supply challenges. It is imperative that President Bola Tinubu initiates a program aimed at achieving self-sufficiency in domestic refining without any further delay.
Officials, including the Minister of State for Petroleum, Heineken Lokpobiri, have acknowledged that the failure of the NNPC to provide crude feedstock to the Dangote Refinery and five modular refineries has hindered their full-scale operation. They attribute this lapse to lower-than-expected crude production.
The Crude Oil Refinery Owners Association of Nigeria has also lamented that numerous other refineries are nearing completion but are facing uncertainties in securing the necessary crude supply.
Meanwhile, the increase in pump prices has raised concerns among business operators and intensified the hardship experienced by Nigerians. Manufacturers have cited the higher per-liter price of diesel in Lagos, reaching N1,275, and N1,300 outside Lagos, as an added burden on production costs and consumer prices.
Dangote Refinery, despite its official opening in May, has repeatedly missed its production commencement targets, with the latest one set for November 30. Nigeria, with over 37 billion barrels in crude oil reserves, is Africa’s largest producer but paradoxically remains the continent’s top importer of refined petroleum products.
The country has four state-owned refineries that have been dormant for more than three decades, incurring substantial losses and significant expenses through questionable turnaround maintenance contracts, yet the government resists the sensible option of selling them.
Instead of vigorously promoting Nigeria as sub-Saharan Africa’s refining hub, officials continue to obstruct private local refining initiatives. The delay in supplying local refiners is perplexing, and the NNPC should clarify whether it is still allocating 445,000 barrels of crude per day for self-use and importation of refined products, and whether it has ceased the controversial crude-for-refined products arrangement as instructed by Tinubu recently.
Analysts propose that the NNPC should allocate the 445,000 bpd to local refiners to ensure a consistent supply of feedstock. It’s also puzzling that while the NNPC consistently secured its allocation regardless of production shortfalls for decades, it now struggles to supply private refiners, citing reduced production.
Tinubu, like his predecessors, who have retained control of the petroleum portfolio, must swiftly resolve this impasse. The solution to the downstream crisis, though involving pricing and subsidy concerns, primarily hinges on achieving self-sufficiency in refining.
The nation’s foolishness must come to an end. In 2021, Nigeria spent $11.3 billion on imported refined products, making it the 18th largest importer worldwide and Africa’s leading importer, with that figure rising to $23.3 billion in 2022, as reported by Aljazeera.
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Among OPEC member states, Algeria refines 677,000 bpd; Iraq boasts over 15 refineries with a combined capacity of 1.0 million bpd; Iran’s 2.64 million bpd capacity represents 22 percent of the Middle East’s total output, according to GlobalData. Libya’s refineries process 634,000 bpd. Even non-OPEC member Egypt, with a crude production of just 660,000 bpd, refines 833,000 bpd, some of which it exports.
Therefore, Nigeria should implement a national emergency program for domestic refining, with a strong emphasis on private sector leadership. State-owned refineries should be promptly sold, and the NNPC should completely disengage from the downstream sector.
