Based on a Punch news report, Ogun State Governor, Dapo Abiodun, on Wednesday, disclosed plans by Gasoline Integrated International to build a N3bn refinery in Tongeji Island, Ipokia Local Government Area of the state. The Chairman of Gasoline Integrated, Dr. Lukman Bolaji, said the refinery would refine 100,000 barrels per day and other petroleum products at the beginning, and later expand to 400,000 barrels per day later. 

Over the years, successive governments have tried to revive the country’s ailing refineries with no evident results. Consequently, over 90% of the refined petroleum products consumed in Nigeria are imported. The refineries located in Kaduna, Warri, and Port Harcourt, with a combined nameplate capacity of 445,000 bpd, have long operated at extremely low capacity due to many years of underinvestment and poor maintenance. Currently, the combined capacity utilization of the existing refineries stands at 0.00% due to the ongoing revamping of the state-owned refineries based on available data from the Nigerian National Petroleum Corporation (NNPC). 

Dangote Group’s refinery, with a planned installed capacity of 650,000 bpd, will likely come on stream in 2023 following delays caused by the coronavirus pandemic and the need to source for more funds. It is expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility upon completion. The refinery is designed to produce up to 50 million litres of gasoline and 15 million litres of diesel a day. BUA Group’s proposed 200,000bpd refinery in Akwa Ibom is also projected to be completed before 2025. The government has also been recently promoting the establishment of modular refineries. 

It is not hearsay that Nigeria has not derived what it should from the current high crude oil prices largely due to the perennial issues of pipeline vandalism, oil theft and some other factors responsible for various production shut-ins. Rather, rising crude oil prices are posing significant fiscal challenges to our economy. The high cost of fuel subsidy and maintenance of non-functioning crude oil refineries in recent times has reinforced our long-standing call for the deregulation of the downstream sector and privatization of the refineries. We understand that the elimination of subsidies is a politically sensitive discourse that many administrations do not want to address to avoid backlash from an already impoverished populace. However, the current fiscal challenges facing the country leave the government with little or no choice. 

With a total installed capacity of 650,000bpd from Dangote Refinery alone, the local refining capacity will more than offset local consumption, currently estimated at 593,000 bpd as of April 2022. These will, among other benefits, reduce the pressure on the local currency as the government will not have the need for dollars to import PMS (N4.56trn was expended on importation of Motor Spirit as of December 2021). Also, the apparent lack of transparency and incessant corruption in the administration of petrol subsidy and refineries will likely fizzle.