In the recently published Nigerian National Petroleum Company (NNPC) 2019 Annual Statistical Bulletin report, data on the performance of the Nigeria Oil & Gas industry was provided. We focused our attention on local petroleum refining capacity in 2019. In 2019, combined capacity utilization of Nigerian refineries fell to 2.5%, an all-time low annual activity level since 1998 when NNPC started providing the data.
The declining capacity utilization of Nigeria’s refineries has resulted in a significant rise in the importation of refined petroleum products. In 2019, Pipelines & Product Marketing Company (PPMC) reported that it imported 9,158,528mt of refined products (PMS, HHK, AGO & ATK) while it evacuated only 963,302mt of refined products from Nigerian refineries, implying local production was just at 10.5% of total refined products available for distribution.
In 2014 when capacity utilization was reported at 14.4%, PPMC evacuated 3,208,461mt of refined products from Nigerian refineries and imported 7,038,264mt of refined products which imply local production was 31.3%. This even pales compared to 2005 where products like ATK & AGO were not imported at all. As of today, Nigeria relies on imports for c.90% of its petroleum products needs.
Resuscitating Nigeria’s refineries has somewhat become an impossible task for reasons that remain unclear. In our view, the refineries need to be privatized. The government on its part needs to implement policies aimed at removing the bottlenecks in the downstream sector so as to attract the much needed private sector investment.
That said, we struggle to see how competitive investments in those refineries will be when Dangote’s 650,000 barrels a day ultra-modern refinery comes on stream.