Sopuruchi Onwuka

The reconstitution of the board and management of the Nigerian national oil company after a series of reforms in the petroleum industry appears to set a formidable stage for the recovery of the domestic petroleum market from the inept hands of public sector bureaucrats who have run the industry aground and left the economy in parlous state.

More importantly, the phase out of political beneficiaries from the management and board of the country’s most important government enterprise holds potential for a restructured operating template for the industry. It also guarantees a free and liberalized market that offers reward opportunities for players with capacity to generate value for the economy.

Industry experts some of whom currently sit on the board of the Nigerian National Petroleum Company (NNPC) Limited have consistently pointed out a clear and proportionate relationship between the fates of the nation’s downstream petroleum industry and the trends in the economic misfortunes of the country.

They have consistently presented unassailable figures showing that economic gains from the upstream petroleum industry which is efficiently run by the private sector players are promptly drained at the poorly managed downstream end of the industry which had been in the inefficient hands of the public sector appointees.

President Bola Tinubu who arrived office on inauguration day with clear intent to liberalize the domestic fuel market had after a year in office constituted a new board of directors led by a non-executive chairman to steer the direction of the NNPC Limited.

Constitution of the new board which also came with the appointment of Mr Bayo Ojulari as the new Groups Chief Executive Officer of the national oil company signals a broad-based approach to tackling the challenges facing the sector. And whereas the company faces numerous problems that reflect underperformance across all its business units, its moribund downstream business units form the hub of crisis in the domestic fuel market.

Thus, in the appointments made in accordance with Section 59, Subsection 2 of the Petroleum Industry Act, 2021, President Tinubu challenged the new board and the GCEO to enhance operational efficiency, restore investor confidence, increase local content, boost economic growth, and advance the commercialization and diversification of gas resources.

And also in the light of the current market crisis, especially the need to dismantle impediments faced by a new crop of refining investments, the president tasked the new leadership of the NNPC Limited to elevate public sector share of crude oil refining output to reach 500,000 by 2030.

The directive on refining means that the NNPC which currently operates nameplate capacity of 445,000 barrels per day with decrepit refining plants should not only revamp the moribund refineries but also build additional 55,000 barrels per day capacity.

The Oracle Today reports that the president, with the targets set for the new GCEO and the Board of the company, might reset the Nigerian downstream petroleum industry to global operating template where full economic value of Nigeria’s petroleum resource would be realized to propel growth in the domestic economy.

President Tinubu also challenged the new leadership of the national oil company to boost crude oil and condensate production from current 1.8 million barrels per day to 3.0 mbd by 2030. He also demanded the new leaders of the company to raise gas production to 10 billion standard cubic feet by 2030.

The new production targets clearly project into the future requirements for domestic crude oil and condensate refining as well as natural gas processing. According to approved refinery projects and licenses, Nigeria is on course to host about 1.5 million barrels per day refining capacity. There are also several gas gathering, processing and distribution licenses that currently underpin numerous projects that approach commissioning stages.

Therefore a concomitant uptick in resource production is almost mandatory to meet imminent feedstock demand from a broader downstream industry base. A robust downstream petroleum processing industry hosting refineries, petrochemical plants and gas processing facilities is crucial to capture full activities in the resource value range, satisfy internal energy demand and boost gross domestic productivity through local content consumption.   

The Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr Felix Ogbe, had told journalists in Lagos that full downstream industry activity is required for the country to achieve the prime economic objectives for the petroleum industry.

The objective, he stated, informed the agency’s partnerships with private indigenous players to spur activity in downstream processing as a way of not just making financial profit but also spurring activities that would derive full value from resources and also broaden the scope of local content absorption in the industry.

Therefore, the entry of eminent petroleum industry technocrats in the board of the Nigerian national oil company is not just celebrated for the pack of private sector experience and efficiency that it brings to the nation’s petroleum resource management; the more urgent prospect is the neutral platform the change presents in accommodating all players in resolving the resolving the overall capacity quandary in the downstream segment of the industry.

The industry has been under the insufferable disposition of the national oil company towards competing private commercial interests in the domestic downstream industry, an attitude that played out in the prevailing feud over crude oil feedstock to private refiners.

Before now, the NNPC Limited had been a public sector monopoly officially entrenched by both privilege and law to determine the fate of any conceived competitor. And the past managers of the company did not appear to accommodate competition nor pretend to improve on its own offerings to the market.

For decades, one of the primary roles of the national oil company which is to guarantee domestic energy supply security appears to have been instrumented to assume total control of the local market, limiting participation of private players with supply allocation and price regulation.

The skilful control of the domestic fuel supply, The Oracle Today reports, led to total dependence of the market on the NNPC whose refineries were almost deliberately disabled to enable money-guzzling massive import deals with traders and offshore refineries that line up in the notorious crude oil swap cycles. 

The rising import bills which shot up from N800 billion in 2014 to over N4.0 trillion in 2022 had raised questions from the Major Energy Marketers Association of Nigeria (MEMAN), the Organized Private Sector and the Organized Labour who all questioned the numbers advanced by the NNPC as the bases for withholding massive funds for domestic fuel supply.

Whereas the NNPC had paraded outrageous 72 million liters per day as average daily domestic fuel consumption, the OPS and Organized Labour estimated that internal consumption should be some 32 million liters per day. Also in unveiling its business case for its debt funded 650,000 barrels per day refinery, Alhaji Aliko Dangote had declared that Nigeria’s national average daily fuel demand was about 30 million liters per day.

It therefore became clear that managers of the national oil company were either totally inefficient and out of tune with realities in the market it pretended to control, or that the figures were deliberately cooked to create slush funds for other purposes that are unfit to feature in public presentations. The widening discrepancy between official NNPC’s domestic fuel demand figures and industry calculations might also find relationship with years of unbroken cycle of surge in subsidy bills during election years.

With the quality, calibre and industry standing of the board members that now oversee the activities of the national oil company, stakeholders are not in doubt that the nation’s downstream petroleum industry which has been the heaviest burden on the economy is set to negotiate from a revenue drain to a profitable industry.

And for the downstream sector to thrive on purely commercial basis, regulators must provide a level playing turf for all players that come to market with offers of value. This entails that public sector privileges must be dismantled to encourage low entry bars and ease of access to facilities, resources and infrastructure.

It is in this context therefore the reassurance by the Ministry of Finance, Wale Edun, that the Naira denominated crude oil procurement transactions for domestic refineries provides immense relief to private players currently struggling with feedstock for their refineries.

Again, Wale Edun’s reaffirmation that the Naira-for-crude initiative for local refineries; overriding attempts by the ousted Group CEO of NNPC Limited, Mallam Mele Kyari, to revert to a dollar-denominated transitions despite a presidential directive to the contrary.

Wale Edun said that the crude and refined product sales in Naira initiative launched in October 2024 is not a temporary or time-bound intervention but a key policy directive designed to support sustainable local refining, bolster energy security, and reduce reliance on foreign exchange in the domestic petroleum market.

Encouraging local refining in any conceivable way, The Oracle Today reports, paves a broad way for speedy recovery of the economy by staving off massive demand for foreign exchange for fuel imports; a key channel for privileged players to lay hands on cheap foreign exchange.

It will also displace massive import of petroleum products by providing the required commercial incentives for local refiners to boost plant capacity, cut local fuel prices, control inflation and explore foreign exchange earnings through export.

With the 650,000 barrels per day Dangote Refinery, 445,000 barrels per day NNPC refineries, 50,000 barrels per day Ibigwe Refinery and 11,000 barrels per day Aradel Refinery; Nigeria should end importation of any form of refined petroleum products. If proposed modular refineries come along with proposed 200,000 barrels per day BUA Refinery, then the country should in the near term become a global source for petroleum fuels.   

With the prevailing plethora of refinery projects and in the face of global energy diversification agenda that demonizes fossil energy, Nigeria has no option that to reposition its petroleum industry targets from crude exports to developing downstream processing hub. The latter holds greater economic value proposition for the country on the long run.

Therefore the task before the eminent members of the NNPC Board is to dismantle all feuds and lead industry collaboration in realizing the broad economic benefits of the country’s hydrocarbon resources by gleaning full value from every crevice in the value chain. The country is running late and time for waste is gone!