Editorial: Can the Nigerian Refineries Actually Work?

The Nigerian Petroleum Sector is no doubt one of the most talked about sectors in the nation, owing to the contribution of the oil sector to the Nigerian Economy.

The Nigerian National Petroleum Corporation (NNPC), which was founded in 1977, and saddled with the responsibility of regulating the petroleum sector, runs and manages the nations four oil refineries.

Nigeria's four refineries which have a combined installed capacity of 445,000 barrels per day, includes the Portharcout Refineries (1983, 1989), Warri Refinery (1978) and the Kaduna Refinery (1980). Nigeria's current crude oil production is put at  2220 bpd. Which is a paltry 10.46% of the initial installing capacity. 

At inception, the nations refineries did moderately well as the nation's four refineries tried meeting their installed capacities of 60,000 bpsd, 150,000 bpsd,110,000 bpsd and 125,000 bpsd respectively. 

Soon after, the refineries started experiencing one form of problems or the other almost simultaneously.

For instance, the Warri Refinery which came on stream in 1989, was managed properly until in 1993, when frequent utility plant failures caused regular shutdowns that resulted in equipment damage. 

The situation deteriorated rapidly from 1994 when the military government of General Sanni Abacha cut NNPC’s “take” from the domestic sales price of oil products from 84% to 22%, causing a cash crisis.

The Kaduna Refinery located in the northern part of the nation, has been plagued by technical malfunctions and breakdowns, and suffers from being in a location at the end of an insecure pipeline that is remote from the crude supply. 

In July 1997, after many years of low output, the refinery suffered a total shutdown following a serious fire, and did not restart until 1999. 

From the analysis presented above, it can be seen that three common factors have accounted for why the nation's refineries have been below par in the last 3 decades. Corruption, Lack of Politcal Will and Low Technical Expertise.

Can the Nigerian Refineries actually work? I think the Nigerian refineries can actually bounce back to the glory days. Recent pronouncements from the NNPC with regards to the refineries and the body language of the Muhammadu Buhari led Federal Government has given Nigerians hope that for once the refineries can indeed work.

For the refineries to actually work, certain things must be put right with immediate effect.

1. Right Policy Framework: For the nations refineries to fully come back to life, the Nigerian National Petroleum Corporation must as a matter of urgency come up with a brand new policy template for the nations refineries. The policy framework must seek to answer some fundamentals. The framework must contain but not limited t issues like budget allocation, privatization, Repairs and Maintenance, International Partners among others.

2. Political Will: Lack of political will on the part of the government and its agencies over the years as become the bane of the nations refineries. The government must be ready to make the refineries operational irrespective of the consequences. The government must also be ready to provide all the needed support in terms of finance and declarations to bring the refineries to its feet.

3. Total Overhaul of Manpower: It is a well known fact that majority of our refinery staff are very very corrupt, conniving with independent oil marketers to deliberately prevent the refineries from working. Relevant agencies must sack all those found wanting.

4. Training and Retraining: Majority of the nations refinery workers still operate with the crude technical knowledge acquired decades ago, with little or no effort for an appraisal. The relevant agencies must ensure that refinery workers are properly trained on how to operate and maintain equipment at the plant.

5. Proper Funding: The government must also guarantee the proper and adequate funding of the refineries to boost performance. This funding will cater for workers salaries as well as purchase new equipment for the plants.

Nigeria as a nation, have no business importing refined petroleum product to the nation if the right and proper ting can be done. The Nigerian National Petroleum Corporation (NNPC), has assured that in no distant time from now, the nations four refineries will commence production at full capacity. I think this is achievable if and only if the above remedies are implemented. 

The Refineries can indeed work.

Michael Onjewu is an economist based in Abuja. Follow me on twitter (@OnjewuMichael).