Let the Local Refineries Breathe

By Simon Okpe

As Nigeria navigates its way through the complexities of economic development, one sector holds the key to unlocking its vast potential: the oil and gas industry. Specifically, the local refineries have long been the backbone of the nation’s energy security. However, since the 1990s, when the fuel importation regime began, Nigeria has gradually shifted away from self-sufficiency in petroleum production, relying heavily on imported fuel to meet its growing energy demands. This paradigm shift has not only undermined the viability of local refineries but also perpetuated a cycle of economic dependence that has stifled Nigeria’s economic growth and development.

Nigeria is home to several local refineries, including the state-owned Port Harcourt Refining Company (PHRC), the Kaduna Refining and Petrochemical Company (KRPC), and the Warri Refining and Petrochemical Company (WRPC), as well as private refineries such as the Dangote Refinery, Waltersmith Refinery, and Niger Delta Refinery, among others. However, despite their presence, the Nigerian National Petroleum Company Limited (NNPCL) has consistently prioritized the importation of petroleum products over supporting local refining capacity. This preference for importation has resulted in a situation where the combined refining capacity of these local refineries remains underutilized, leaving Nigeria reliant on imported petroleum products to meet its energy demands.

The crude swap regime, introduced as a temporary measure to address the nation’s fuel supply challenges, instead became a perpetual drain on the economy. Under this arrangement, Nigeria’s crude oil was exchanged for refined petroleum products, ostensibly to meet domestic demand. However, this scheme was plagued by opaque dealings, inflated prices, and dubious partnerships, resulting in staggering economic losses. Billions of dollars were squandered on these swaps, which failed to provide value to the Nigerian economy while enriching a select few. That regime was a stark reminder of the systemic inefficiencies and corruption that have hindered Nigeria’s progress that should not be repeated.

Furthermore, Nigeria’s over-reliance on crude oil exports has meant that the country has failed to capitalize on the vast economic potential of the by-products of crude oil. While crude oil is refined into various petroleum products, such as petrol, diesel, and kerosene, other valuable by-products like lubricants, bitumen, and liquefied petroleum gas6 (LPG) are often unaccounted for. These by-products, which could be harnessed to generate additional revenue and stimulate industrial growth, are frequently lost to the preference for fuel importation. This anomaly has resulted in significant economic losses, estimated to be in the billions of dollars, which could have been channeled into developing critical infrastructure, promoting economic diversification, and improving the lives of Nigerians.

It is on this heels that Leadership Newspaper believes that the deliberate starving of local refineries of crude oil has had far-reaching and devastating consequences for the Nigerian economy. By denying local refineries access to crude oil, the ability of local refineries to meet the local demands has been effectively stifled, entrenching a regime of perpetual reliance on imported fuel, causing prices to skyrocket and placing an undue burden on already struggling Nigerians.

It is the position of Leadership newspaper that to unlock the full potential of Nigeria’s oil and gas sector, local refineries must be supplied with crude oil to meet their refining capacity. This is in line with the Nigerian Content Policy, which aims to promote local participation and domicile of oil and gas activities. By providing local refineries with adequate crude oil supply, the government can stimulate economic growth, create jobs, and increase local refining capacity. This will not only reduce Nigeria’s reliance on imported petroleum products but also ensure that the country derives maximum value from its natural resources.

The recent decision by the federal government to sell crude oil to local refineries in Naira is also a bold and commendable step towards reducing the pressure on the country’s foreign exchange reserves and promoting the growth of local industries. By transacting in Naira, the government can conserve scarce foreign exchange, reduce the demand for dollars, and mitigate the impact of exchange rate fluctuations on the economy. This policy initiative has the potential to boost the competitiveness of local refineries, increase domestic production of petroleum products, and ultimately reduce Nigeria’s reliance on imported fuel.

While the sale of crude oil in Naira is a commendable initiative, its effectiveness hinges on the availability of adequate crude oil supply to local refineries. For this policy to truly bear fruit, these refineries must receive a consistent and sufficient supply of crude oil to operate at optimal levels. Anything short of this would undermine the potential benefits of the policy, leaving local refineries struggling to meet domestic demand for petroleum products and forcing the country to continue relying on imported fuel.

Our local refineries can meet the country’s domestic consumption demand for petroleum products. With a combined installed capacity of over 650,000 barrels per day, these refineries can produce enough petrol, diesel, kerosene, and other petroleum products to satisfy local demand, eliminating the need for imports. By doing so, Nigeria can conserve foreign exchange, create jobs, stimulate economic growth, and reduce its reliance on imported petroleum products, ultimately achieving energy security and self-sufficiency.

The Nigerian National Petroleum Company Limited (NNPCL) is playing a dangerous game by starving local refineries of adequate crude oil supply. This deliberate act of sabotage is not only undermining the viability of local refineries but also perpetuating the country’s reliance on imported petroleum products. By doing so, the NNPCL is exacerbating the pressure on the Naira, increasing the nation’s foreign exchange burden, and undermining the government’s efforts to promote economic growth and development. It is imperative that the NNPCL reverses this destructive policy and prioritizes the supply of crude oil to local refineries to ensure their optimal operation.

As we advocate for the growth and development of local refineries, Leadership Newspaper is also calling for substantial reforms in the oil and gas sector. These reforms should prioritize transparency, accountability, and efficiency in the allocation of crude oil to local refineries. We believe that a reformed oil and gas sector, one that promotes competition, innovation, and local content, is essential for unlocking the full potential of Nigeria’s local refineries estimated at approximately 1.1 million barrels per day and achieving energy security and self-sufficiency.

Nigeria’s oil and gas sector is at a critical juncture, and the decision to prioritize the growth and development of local refineries is a step in the right direction. With a combined refining capacity of over 1.1 million barrels per day, local refineries have the potential to meet the country’s daily petroleum consumption needs, reduce reliance on imports, and stimulate economic growth.

The government must provide the necessary support and reforms to ensure the optimal operation of local refineries, thereby unlocking the full potential of Nigeria’s oil and gas sector and securing a brighter economic future for the nation.

Okpe PhD writes from Effurum, Delta State.

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