NIGERIA, the highest oil producer in Africa, is home to six refineries. The federal government, through its controlling stake in the Nigerian National Petroleum Corporation (NNPC) owns four of the refineries. Among them are the two Port Harcourt refineries with a combined installed capacity of 210,000 barrels per day. The second is situated in Warri, Delta State. The Warri refinery began operations in 1978. It has a distillation capacity of 125,000 barrels per day.
Nigeria, although one of the largest oil producers in Africa, has historically relied on imported refined petroleum products due to inadequate domestic refining capacity. This dependence has strained the country’s foreign exchange reserves and made the economy vulnerable to global oil price fluctuations. The Dangote Refinery, with a capacity of 650,000 barrels per day, is expected to significantly reduce the need for fuel imports, saving the country billions of dollars annually and stabilising the economy.
The third, Kaduna Refinery, was established in 1980 with a starting capacity of 50,000 barrels per day. It underwent expansions in 1983 and 1986 to reach its processing capacity of 110,000 barrels per day. Originally designed to cater to Northern Nigeria’s needs, the Kaduna Refining and Petrochemical Company produces petroleum products including lubricating oils.
The fourth refinery is owned by Niger Delta Petroleum Resources (NDPR), which is a part of Niger Delta Exploration and Production PLC (NDEP). The NDPR refinery is a modular refinery, with a capacity of processing 1,000 barrels per day (bpd) of oil sourced from its own fields in the Niger Delta area.
The Waltersmith Modular Refinery, located in Ibigwe, Imo State, which is the fifth refinery, was officially launched by former President Muhammadu Buhari in November 2020. It has an installed capacity of 5,000 barrels per day.
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Billionaire businessman, Aliko Dangote, owns the sixth refinery. The Dangote Refinery, inaugurated in May 2023 and situated in the Lekki Free Trade Zone in Lagos, stands as the integrated refinery in Africa boasting a capacity of 650,000 barrels per day (bpd). Built at the cost of $19 billion, the refinery refining in December 2023. It started the distribution of its products locally and globally by May 2024. The refinery stands to boost Nigeria’s refining capabilities, lessen the nation’s over reliance on imported oil products and contribute to economic growth by creating job opportunities and saving foreign exchange.
The ongoing poor performance, or lack of performance, of Nigeria’s state-owned refineries stems from a range of factors. Issues such as aging infrastructure, corruption, mismanagement and operational inefficiencies play a role in this scenario. Additional challenges like policy and regulatory hurdles, lack of accountability and outdated technology contribute to the problem. Together, these elements impede the refineries operational effectiveness and their capacity to function at installed capacity.
The complex situation with regards to the Dangote Refinery is that there are glaring evidences, based on public pronouncements by certain officials within Nigeria’s government petroleum agencies, pointing to entrenched conspiracy against the refinery, particularly in the supply of crude oil.
The Dangote refinery, on the other hand, once fully operational, is poised to play a critical role in transforming Nigeria’s economy. Here are some key points highlighting its importance:
Nigeria, although one of the largest oil producers in Africa, has historically relied on imported refined petroleum products due to inadequate domestic refining capacity. This dependence has strained the country’s foreign exchange reserves and made the economy vulnerable to global oil price fluctuations. The Dangote Refinery, with a capacity of 650,000 barrels per day, is expected to significantly reduce the need for fuel imports, saving the country billions of dollars annually and stabilising the economy.
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By reducing the importation of petroleum products, Nigeria can conserve its foreign exchange reserves. Furthermore, the refinery is expected to export refined products to neighbouring countries, generating additional foreign exchange earnings. This will help strengthen the naira and improve the overall balance of payments.
The refinery will contribute to Nigeria’s energy security by ensuring a steady and reliable supply of refined petroleum products in the country. This is crucial for maintaining economic stability, as fuel shortages have consistently disrupted various sectors, including transportation, manufacturing, agriculture and wellbeing of people.
It has become increasingly evident that a powerful cartel, deeply entrenched within Nigeria’s petroleum sector, is determined to maintain the status quo of importing refined petroleum products rather than supporting local refining efforts like the Dangote Refinery. This cartel benefits from the lucrative importation business and sees local refining as a threat to its interests. Despite the President’s clear directives aimed at securing crude oil supplies for local refineries, this group’s influence poses a significant challenge.
The refinery has already created thousands of direct and indirect jobs, both during the construction phase and now. Value-added chain jobs will surely also be created once it becomes fully operational. This will have a multiplier effect on the economy, stimulating growth in various sectors such as logistics, retail, and services. The increased economic activities will also lead to higher tax revenues for the government, which can be reinvested in infrastructure and social programs.
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It will produce not only fuel but also raw materials for the petrochemical industry. These materials are essential for the production of plastics, fertilizers, and other industrial goods. By providing these inputs domestically, Dangote refinery will support the growth of Nigeria’s manufacturing sector, reducing the need for imports and fostering industrialisation.
Nigeria has historically subsidised the cost of imported fuel, which has been a significant drain on the national budget. With increased domestic refining capacity, the need for such subsidies is expected to diminish, freeing up government funds for other critical areas like healthcare, education, and infrastructure.
The success of the Dangote Refinery could serve as a catalyst for further investment in Nigeria’s energy sector. It sends a positive signal to both local and international investors about the potential of large-scale industrial projects in the country. This could lead to more investments in related industries such as petrochemicals, refining, and energy infrastructure.
The refinery positions Nigeria as a potential hub for refined petroleum products in West Africa and beyond. This can strengthen Nigeria’s influence in regional and global energy markets, potentially giving the country greater leverage in trade negotiations and geopolitical affairs.
The complex situation with regards to the Dangote Refinery is that there are glaring evidences, based on public pronouncements by certain officials within Nigeria’s government petroleum agencies, pointing to entrenched conspiracy against the refinery, particularly in the supply of crude oil.
These officials have created the impression within the public to believe that they are deliberately restricting or complicating the refinery’s access to Nigerian crude, forcing the refinery to source the product from other countries. This situation is seen as an attempt to undermine the refinery’s operations and stifle its potential dominance in the local market.
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Mr President’s intervention, while crucial, must go beyond issuing directives. Given the cartel’s power and resistance to change, it is imperative that Mr President ensures his orders are not just made but rigorously enforced. This requires a robust monitoring mechanism to track compliance by all relevant government petroleum agencies. Any attempt to undermine these directives should be met with swift and decisive action, including penalties for non-compliance.
A high-ranking figure in Nigeria’s oil and gas regulatory agency, decided to launch a campaign to discredit the refinery. He started by publicly questioning the quality of the diesel being produced at the refinery, alleging that it does not meet the required industry standards. Despite a lack of concrete evidence, he claimed that the diesel from Dangote refinery contains impurities that could damage engines and pose a risk to consumers. These allegations were strategically released through press conferences and social media, creating a wave of concern among the public.
In addition to the quality concerns, the official went public with claims that the refinery is operating without proper licensing. He asserted that the refinery has not yet received the necessary approvals from the government to produce and distribute petroleum products, casting doubt on the legality of its operations.
While the Dangote Refinery struggles to secure local crude oil, Nigeria continues to supply crude to refineries outside the country. This has sparked controversy and criticism, as it appears counterproductive to the nation’s goal of achieving self-sufficiency in petroleum refining. Critics argue that this practice highlights the inefficiency and possible corruption within government petroleum agencies, which should prioritise supporting domestic refining capacity over exporting crude oil to foreign refineries.
In the light of the challenges faced by the Dangote Refinery in securing a steady supply of crude oil, the President has intervened to address the situation. The President has taken steps to ensure that the refinery receives the necessary crude supplies to operate at full capacity. This intervention includes directives to relevant government petroleum agencies to prioritise the supply of crude oil to the refinery.
It has become increasingly evident that a powerful cartel, deeply entrenched within Nigeria’s petroleum sector, is determined to maintain the status quo of importing refined petroleum products rather than supporting local refining efforts like the Dangote Refinery. This cartel benefits from the lucrative importation business and sees local refining as a threat to its interests. Despite the President’s clear directives aimed at securing crude oil supplies for local refineries, this group’s influence poses a significant challenge.
Mr President’s intervention, while crucial, must go beyond issuing directives. Given the cartel’s power and resistance to change, it is imperative that Mr President ensures his orders are not just made but rigorously enforced. This requires a robust monitoring mechanism to track compliance by all relevant government petroleum agencies. Any attempt to undermine these directives should be met with swift and decisive action, including penalties for non-compliance.
By taking a firm stand and ensuring that those who sabotage the nation’s efforts toward self-sufficiency are held accountable, the president can dismantle this entrenched cartel and secure the future of local refining in Nigeria. This will ultimately serve the national interest, reduce dependency on imported fuel, and boost the economy through the full utilisation of Nigeria’s refining capacity.
Comrade Takor was a two-term President of NASU, a two-term National Treasurer of NLC and an inaugural member of the Board of PenCom. Comrade Takor retired as a Director in federal service and is now a Lagos-based legal practitioner. He is an alumnus of the National Institute of Policy and Strategic Studies (NIPSS), Kuru-Jos, Plateau State.
