A bizarre situation in which Nigeria produces and exports a large volume of crude oil but imports almost 100 per cent of the petroleum products it consumes remains a grave cause for concern. It is very unfortunate that successive governments have disastrously allowed this to fester for too long such that the country has been turned into a gigantic dumping ground for dirty fuel from Europe.
There are various ways the anomaly hurts us. According to a recent report by Stakeholder Democracy Network, international dealers export to Nigeria around 900,000 tonnes a year of low-grade, “dirty” fuel, made in Dutch, Belgian and other European refineries. Researchers found that on the average, the fuels imported from Europe exceeded the European Union pollution limits by as much as 204 times, and by 43 times the level for petrol.
The 2020 Annual Statistical Bulletin released by the Organisation of the Petroleum Exporting Countries last July showed that the value of petroleum imports into Nigeria exceeded the value of exports by $58.5 billion within a five-year period. Petroleum imports from 2015 to 2019 were valued at $264.57 billion, while exports were $206.07 billion. It beggars belief that a country endowed with abundant crude oil and gas still depends heavily on imported petroleum products after over six decades of producing the natural resources. The over-reliance on fuel imports for many years has wreaked havoc on the economy.
Among its peers in OPEC, Nigeria had the lowest refinery throughput of 9,000 barrels per day in 2019, down from 38,000bpd in 2018. The country, Africa’s largest oil producer, lagged behind other member countries on the continent — Gabon (14,000bpd), Congo (17,000bpd), Angola (54,000bpd), Libya (90,000bpd) and Algeria (660,000bpd) — according to the report. Saudi Arabia had the highest refinery throughput of 2.48 million bpd in 2019, followed by Iran (1.72mbpd) and the United Arab Emirates (1.04mbpd).
All the four refineries owned by the Federal Government have remained in a state of disrepair for years despite several reported repairs that gulped billions of taxpayers’ money. The refineries, which are located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 bpd, but their performance has been abysmally poor for a long time.
The refineries, which are subsidiaries of the Nigerian National Petroleum Corporation, are mere cost centres, causing huge losses to the corporation. The refineries made a total loss of N406.62 billion in 2017 and 2018, according to their latest audited financial statements. Curiously, the Kaduna Refinery and Petrochemical Company Limited did not generate any revenue in 2018, but incurred a total cost of N64.68 billion, comprising N24.69 billion direct cost and N39.99 billion administrative expenses. There are many people in the NNPC doing little or nothing and collecting so much money.
In October 2015, the President, Major General Muhammadu Buhari (retd.), in his Independence Day Speech, said, “Those of our refineries which can be serviced and brought back into partial production would be enabled to resume operations so that the whole sordid business of exporting crude and importing finished products in dubious transactions could be stopped.”
Almost five years later, the status quo remains – fuel importers are still having a field day. Worse still, all the refineries have been sitting idle for months. The NNPC said in its monthly report for May 2020 that no petroleum products had been produced by the refineries for the past 11 consecutive months. It attributed the lack of production to “ongoing rehabilitation works at the refineries.”
After failing miserably to get the loss-making refineries back on their feet in 2019 as it promised, the Federal Government has set a new target for the rehabilitation of the plants. On May 4, 2017, the NNPC expressed its commitment to actualise the December 2019 target set by the Federal Government to end the importation of petroleum products into the country. The then Minister of State for Petroleum Resources, Ibe Kachikwu, in May 2017, even said he would resign if the country failed to attain self-sufficiency in the refining of petroleum products by 2019. But the plan to get third-party financiers and the original refinery builders to provide the requisite funding and technical support was thwarted after negotiations with financiers stalled in December 2018, according to the NNPC.
To be sure, virtually every administration since 1999 has told Nigerians that the refineries would be rehabilitated or repaired. The Group Managing Director, NNPC, Mele Kyari, since he took over the mantle of the corporation’s leadership in July 2019, has reiterated that familiar refrain, saying he planned to fix the refineries and put an end to fuel importation by 2023. That pronouncement just reeks of deceit. The country cannot afford to continue wasting massive amounts of money on the refineries in the name of rehabilitation or so-called turnaround maintenance. Our reliance on imports for refined products is shameful, to put it mildly, and this racket must stop.
In 2012, the administration of Goodluck Jonathan set up the National Refineries Special Task Force to advise the government on how best to achieve national self-sufficiency in petroleum products within a strong commercial framework in the shortest time. The task force, which submitted its report later that year, noted that the refineries had not been efficiently and safely operated and maintained for more than 15 years. It said changes in the ownership structure and business model of the refineries were necessary in order to turn them around.
It is time to dust off the petroleum industry reform. The Federal Government should sell the refineries and encourage the private sector to invest more in the refining subsector so that the country will not have to depend so much on one refinery. There are 38 proposed modular refineries with capacity ranging from 5,000bpd to 30,000bpd, and six conventional plants with a total capacity of 1.35 million bpd, according to the Department of Petroleum Resources. The government should provide incentives such as tax rebate for serious private investors that are ready to build refineries. The more, the merrier.
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