The Great Nigerian Refinery Conundrum: 18 Years of Inactivity Despite Thriving Fuel Imports

Nigeria’s dependence on imported petroleum products continues to be a source of concern, despite the issuance of more than 57 refinery licenses over the past 18 years, with an additional five being issued recently. The country appears to be accepting of this situation, despite its detrimental impact on the economy.

In an effort to tackle the issue of crude oil supply to refineries, the Federal Government is contemplating the issuance of oil field licenses to refinery owners. With over 60 refinery licenses remaining inactive, the theoretical refining capacity exceeds 2.3 million barrels per day, which surpasses the country’s total daily crude oil production.

However, it seems that many of the current license holders have no intention of refining crude oil, prompting stakeholders to accuse them of failing the capacity test. Despite assurances that the Port Harcourt refinery will be operational by December 2023, concerns regarding transparency and accountability continue to escalate.

The processes for licensing and approving the establishment of private greenfield or modular refineries are being scrutinised, with reports from the now-defunct Department of Petroleum Resources indicating that 40 refinery licenses were dormant as of 2021. The Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) is expected to furnish regular status reports on refineries under the Petroleum Industry Act (PIA), which has not occurred.

Furthermore, the regulated prices of petroleum products in the country render refining economically unviable for many investors, further exacerbating inactivity in the sector. Most of the operational refineries in the country focus exclusively on diesel and aviation fuel, despite high demand for premium motor spirit.

In light of these challenges, energy scholars and experts have recommended the implementation of the PIA and the enabling of the market to operate as intended. They have also urged the government to reassess the policy and regulatory environment to establish a conducive atmosphere for refinery operations. The prevailing consensus is that revoking licenses may not resolve the issues at hand; rather, the emphasis should be on creating conditions that promote investment and stimulate growth in the sector.

As the sector contends with these challenges, it is essential for the Nigerian government to conduct a comprehensive assessment of the refining industry, with a focus on creating an environment that supports refinery operations. This may necessitate substantial policy adjustments and regulatory reforms to stimulate activity in the sector and reduce the country’s reliance on fuel imports.

In conclusion, the inactive state of refinery licenses 18 years after their issuance underscores the necessity for a thorough review of policies and regulations to facilitate refinery operations in Nigeria. The country’s persistent dependence on imported petroleum products has far-reaching implications for its economy and energy security. Addressing the underlying challenges and creating a conducive environment for investment in the refining sector is imperative for the government.