Folarin Kehinde

The Nigerian National Petroleum Company limited (NNPCL), according to its August 2022 FAAC report, spent the sum of N54.663 billion on rehabilitating refineries in the country between January and July 2022.

The highest amount was spent in June, when the sum of N18.221 billion was spent on rehabilitating refineries.

Despite these investments in the health of refineries, Nigeria’s refineries have continued to suffer a mysterious ailment that has defied the billions spent on them. The refineries’ outputs remain low.

Warri refinery, Kaduna refinery and Port Harcourt refinery are some of the major refineries in the country. These three refineries have a combined capacity of producing over 400,000 Barrels per day but have failed to live up their capacity for years.

Nigeria still relies heavily on refined petroleum importation to meet its daily needs, and the failure to refine crude at home has left the country at the mercy of international market forces and allowed the ball and chain of subsidy to remain, gulping huge revenue that is not justifiable compared to the income of the sale of crude. Between 2015 and 2019, Nigeria spent a sum of $37.85 billion dollars on petroleum importation.

The NNPC announced in 2021, that it spent N100 billion to rehabilitate refineries although the refineries have yet to bridge the gap on refined petroleum products despite the investments

While the Nigerian government has defended its decision to rehabilitate refineries, experts have opined that spending money on rehabilitating refineries is not the right direction, rather the country should invest on new ones. The International Energy Agency (IEA), has also stated that the country will be better off investing in new refineries, stating that plans to rehabilitate the ailing refineries may not materialise.

Others have argued that the country should privatise the refineries to ensure investment in them and efficient running. The NNPCL appears to agree with this argument and have said they already have proposals from private entities for the management of the country’s refineries. However, the ailing refineries will only be handed over to private management after they have been restored to full health and are operational.

It is anybody’s guess when that will be because Nigeria’s investments in the health of its refineries has not led to any “healthy” outcomes.

In March 2021, the federal executive council approved the sum of $1.5 billion for Port Harcourt refinery upgrade. In August of the same year, $1.48 billion was approved for Warri and Kaduna refineries upgrade.

In March, 2021, a dollar averaged N378, meaning the sum approved for Port Harcourt refinery equaled N567 billion. In August, at an average dollar rate of N411, the amount equated to N608.28 billion. This is contrary to the NNPC’s claim of spending N100 billion on refinery rehabilitation in 2021.

Whatever amounts paid to resuscitate the refineries, ill health has persisted and they are not operational.

Between April 2020 to April 2021, the Warri, Kaduna and Port Harcourt refineries made operating losses of N91.856 billion. During this period, the refineries only received 8,266 Metric Tons of crude Oil. This was received in December, 2020 (3,949), January 2021 (3,851), February (466). In other months, the refineries received zero crude oil inputs.

It appears as if the country does not believe in the resuscitation of its “ailing” refineries nor in its capacity to meet local demands as the hopes for increased local production appears to rest on the privately owned Dangote refinery with a capacity of 650,000 barrels per day.

The Federal government, through the newly rebranded NNPCL acquired a 20% stake in the refinery and according to the Group Chief Executive Officer of NNPC Ltd, Mele Kyari, they are very proud of this acquisition.

The excitement notwithstanding, NNPCL has said ailing and new refineries combined will still not meet local demands, which means subsidy will likely remain “a thing around Nigeria’s neck” for a while longer.

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