Amid the steady fall in the price of crude oil in the international market and its negative implications for the economy, more discouraging news came a few days ago that Nigeria will continue to be a net importer of petroleum products for, at the least, the next 20 years. This is in spite of Nigeria’s position as the sixth largest producer of petroleum in the world, and its investment of huge sums in oil refining facilities over the years. The news of the nation’s worrisome resignation to oil imports for the next two decades has also come despite government’s repeated assurances that it would build more refineries and rehabilitate the existing ones.
According to the Deputy Director, Gas, of the Department of Petroleum Resources (DPR), Mr. Oliver Okparaojiakor, who represented the Minister of Petroleum Resources at a conference on Oil Trading and Logistics (African Downstream) held in Lagos, the expectation of continuing dependence on oil for the next two decades is largely due to the failure to deregulate the downstream oil and gas sector. Besides, government says the sector needs an annual investment of N3.2 trillion, unless the current subsidy on fuel is removed to stimulate competition across the value chain.
Although the petroleum ministry says Nigeria is on the path to increasing its petroleum refining capacity by 2020 through the long-awaited private refineries proposed by private sector operators such as Dangote Group and Orient, it is unacceptable that Nigeria will continue to import petroleum products for the next two decades. It is also painful that there are no concrete plans to make our refineries come on full stream anytime soon.
Nigeria’s situation is not helped by the equally appalling situation in Africa where there are only 24 fuel refineries with a total refining capacity of 1.6 million barrels per day for a population that is almost one billion. Evidently, rising population in Africa inexorably leads to a corresponding demand for more petroleum products. Unfortunately, the inefficiency and lack of competitiveness of most of the refineries in Africa, including the four main ones in Nigeria, are likely to continue to keep their utilization abysmally low, at least in the short term.
However, this is not an excuse to abruptly remove the subsidy on petroleum products such as fuel and kerosene. Such a move will inflict more hardship on the people. Instead, the present fall in fuel prices and our reliance on the importation of petroleum products should be a wake-up call for government to design strategies to ensure a competitive market environment and sustained supply in a guided deregulation of the downstream oil and gas sector.
One option is to start refining a sizeable proportion of our crude oil for local consumption, and exports. In view of the volatility of oil prices, it has also become imperative that we begin to look beyond oil as the mainstay of the Nigerian economy. Clearly, the continued importation of petroleum products is at a huge cost to the economy.
While we encourage private investors to partner with national oil companies and the government to build more refineries so that Nigeria will be less dependent on oil imports, the National Assembly should accelerate the passage into law of the Petroleum Industry Bill (PIB), which is critical to the survival and growth of the country’s oil and gas industry.
Altogether, this is the time to sincerely tackle the challenges in the downstream sector. These include funding, corruption and other unwholesome acts that have made transparency, accountability and unfettered operation of our refineries difficult.
