Nigeria’s Refinery | Suggestions Mounting

Nigeria’s Refinery Conundrum: The Case for Privatization and Modular Alternatives

-       Special Report -

Despite being one of the world's top crude oil producers, Nigeria remains paradoxically dependent on imported refined petroleum products. The country’s state-owned refineries, Port Harcourt, Warri, and Kaduna, have long been a financial and operational burden. After nearly $3 billion in rehabilitation efforts, they remain mostly non-functional, fueling calls from stakeholders for complete privatization.

A Money Pit Seemingly, with No Bottom

Between 2013 and 2023, Nigeria’s government has spent billions attempting to revive these aging facilities. Among the staggering expenditures:

• $1.5 billion for Port Harcourt (approved in 2021)
• $897 million for Warri
• $586 million for Kaduna
• Additional ₦100 billion in 2021 alone
• A cumulative $396.33 million on Turnaround Maintenance (TAM) between 2013–2017

Despite the investments, the refineries remain idle or plagued with false promises of operation. Recently, the shutdown of the Port Harcourt refinery—just months after it was declared “operational”, sparked renewed public outcry and intensified scrutiny.

Why the Refineries Failed

Several interwoven issues have rendered the refineries dysfunctional:

• Chronic mismanagement and corruption, with opaque contracting and weak oversight
• Outdated infrastructure, some dating back to the 1960s, never properly modernized
• Vandalized crude supply pipelines, disrupting feedstock delivery
• Subsidy regimes distorting market prices, making refining unprofitable
• Political interference, especially in hiring and downsizing decisions
• A lack of strategic vision to pivot to more viable alternatives like modular refineries

Stakeholders Speak Out

Leading voices have now joined the call for reform:

• Manufacturers Association of Nigeria (MAN): Describes the refineries as “a pure drain” on national resources and champions full privatization.
• Crude Oil Refineries Association of Nigeria: Urges government to sell the refineries “as scrap” and reinvest the proceeds into modular refinery development.
• Major Energy Marketers Association of Nigeria (MEMAN): Advocates for professional, private management to ensure efficiency and promote competition with the Dangote Refinery.
• Former President Olusegun Obasanjo: Recalls earlier privatization efforts that were reversed and says further investment in state-run refineries is futile.
• Industry analysts: Recommend Public-Private Partnerships (PPPs) as a middle ground—balancing public interest with private-sector efficiency.

Modular Refineries: A Smarter Alternative?

Unlike mega state-run facilities, modular refineries are compact, factory-built units with capacities ranging from 1,000 to 30,000 barrels per day. Their benefits include:

• Faster deployment (12–18 months)
• Lower capital costs
• Scalability
• Localization closer to crude oil sources, reducing reliance on vulnerable pipelines

By incentivizing modular refinery investments and offering equity stakes instead of full ownership, the government could generate returns while promoting fuel self-sufficiency and job creation.

What’s Still Missing?

To fully chart a future, Nigeria must address the following:

• Clarity on buyer interest and transparency in potential sales
• Labor protections and retraining programs to cushion workforce transitions
• A communication strategy to build public trust in privatization
• Lessons from global case studies, from Brazil’s Petrobras to India’s PPP models
• Independent audits to ensure accountability for past expenditures

Privatizing Nigeria’s refineries is not merely about transferring ownership; it’s about unshackling the country from decades of inefficiency, waste, and missed opportunity. Whether through outright sale, PPPs, or pivoting to modular infrastructure, one thing is clear: business as usual has failed.

The road ahead demands bold leadership, stakeholder collaboration, and a commitment to putting national interest before sentiment. Because in energy, just like governance, performance, not nostalgia, must drive decisions.