Over the years, Nigeria has grappled with inefficient oil facility management, pushing the country to rely on imported refined petroleum products. As part of the broader effort to address these challenges, the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) is advocating the privatisation of the Warri and Kaduna refineries. Privatising these refineries would spark more competition in the oil sector, potentially marking a significant turning stride in Nigeria’s energy landscape.
According to a statement released by the association, privatisation will also usher in a new era of transparency and accountability in the downstream petroleum sector. “Privatise Nigerian-owned refineries, such as the Warri and Kaduna refineries, to reputable private companies to improve efficiency and reduce government spending,” it said. “Foster a competitive market by encouraging new entrants and promoting a level playing field to prevent monopolies and ensure fair pricing.”
Why the Private Sector is Key to Addressing Bad Refineries
Once an epicentre in the global oil industry, Nigeria suffered a dramatic decline on the ranking. The country has slipped out of the top ten oil-producing nations, and is also becoming a significant importer of refined petroleum products. According to a 2023 report by Globe Newswire, the unfortunate turndown is largely attributed to a combination of factors, including the crippling state of its refineries, inadequate investment, widespread oil theft, and chronic government’s neglect of maintaining infrastructure.
In December 2024, the Nigerian National Petroleum Company (NNPC) Limited announced the successful restart of two major refineries. The Warri Refining & Petrochemicals Company (WRPC) in Delta state resumed operations on December 30, while the Port Harcourt refinery commenced crude oil processing on November 26.
However, the country’s former President, Olusegun Obasanjo shared his concerns about the refineries, citing inefficient government management and corruption as major issues.
Obasanjo expressed confidence in private management, pointing to Aliko Dangote’s effective management of his privately owned refinery as an example.
Last year, in an attempt to address the management challenges and bolster energy security, NNPC announced plans to partner with reputable operations and maintenance companies. The collaboration aims to optimize the performance of the Warri Refining and Petrochemical Company (WRPC) and Kaduna Refining and Petrochemical Company (KRPC), ensuring reliable and sustainable operations that meet the nation’s fuel supply demands and energy security obligations.
According to Mike Osatuyi, a seasoned oil and gas expert, privatising Nigeria’s refineries could be a game-changer for the country’s oil and gas sector. By introducing competition and promoting innovation, privatisation could help address fuel scarcity, potentially leading to lower pump prices. If this development is successful, it could also have a significant effect on the broader economy, stimulating growth and development.
Highlighting the effect of privatising these facilities, he said it will not only enhance Nigeria’s self-sufficiency in petroleum products but also significantly reduce operational costs.
“It could revive Nigeria’s energy sector, paving the way for greater economic stability and self-sufficiency,” he said.
By introducing and increasing private ownership in Nigeria’s oil and gas facilities, the government is on the voyage of transforming the sector. A compelling case study is evident in Angola, where the strategic collaboration between public and private entities in the oil sector has successfully attracted foreign investment. The country’s proactive efforts to enhance its refining capacity through collaborative initiatives are aimed to transform the country into a leading regional oil supplier in Southern Africa, stressing the vast potential of public-private partnerships in driving growth and development.
There’s no doubt that privatization promotes national development, and Nigeria’s telecommunications industry is a living example. The deregulation of the sector, initiated in 1992, has resulted in tangible results, transforming various regions across the country. A notable illustration of this progress is the Adekanbi village in Oyo State, which has witnessed significant development and growth as a result of the presence of telecommunications service providers, highlighting the positive impact of privatization on local communities.
Prior to the deregulation, Nigerian Telecommunications Limited (NITEL) held a monopoly on the country’s telecommunications sector, operating under sole government control. This limited Nigerians’ access to telecommunications services, stifling technological advancement. The sector’s sluggish growth pushed the government to adopt privatization, a strategic move that has since injected development and transformed the telecommunications landscape in Nigeria.
In a tremendous move, the government divested 75 percent of NITEL’s shares to Transcorp, a Nigerian multinational conglomerate, and 25 percent to various Nigerian companies. The strategic move has yielded remarkable results. In 2000, NITEL’s subscriber base was a mere 30,000, whereas today, Nigeria boasts an impressive over 200 million phone subscribers. This is a testament to the transformative power of privatization in expanding access to telecommunications services.
The Success of Dangote Refinery
If there’s one closer example of the success of privatization in the oil and gas industry, the Dangote refinery is a full proof. The Dangote Oil Refinery, Africa’s largest, has become a major driver of Nigeria’s export market. Its impact is not hard to seek: The 650,000-barrel-per-day single-train facility is expected to raise Nigeria’s GDP growth rate from 4.15 percent in 2024 to 6.21 percent in 2030, according to a report by Analysts Data Services and Resources (ADSR) Limited.
Last month, Aliko Dangote, the founder, stated that it was sending two cargoes of jet fuel to Saudi Aramco as part of its plans to expand. This development would not only make Nigeria a cynosure for refining, but potentially strengthen it foreign exchange inflows.
African countries—such as Ghana, South Africa, Angola And Cameroon—are now buying petrol from the Dangote refinery. This is another profound impact of privatization.
By privatizing its refineries, Nigeria can draw into a wealth of foreign investment, specialized expertise, and innovation, thereby marking a significant shift away from the government’s existing approach and creating a platform for a more efficient and competitive oil sector.
Shereefdeen Ahmad is a Free Trade Fellow at Ominira Initiative
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