Olufemi Aduwo is the Permanent Representative of the Centre for Convention on Democratic Integrity (CCDI) to the United Nations (UN) and an associate of the Independent lntegrity Group of the World Bank. In this interview, he speaks on the economic and security challenges posed by oil theft in Nigeria, among other issues
How did Nigeria’s oil industry reach its current state?
A lack of maintenance culture coupled with corruption has been the bane of Nigeria’s oil industry. Inefficiencies in the sector have persisted for decades, reflecting systemic challenges dating back to the military era. Notably, Nigeria’s refineries have long struggled to operate effectively.
Successive administrations awarded contracts for Turnaround Maintenance (TAM), yet these initiatives consistently failed to deliver results.
Under General Ibrahim Babangida’s administration, efforts were made to maintain refinery operations, but poor execution and mismanagement undermined progress.
General Sani Abacha allocated substantial funds for TAM, but these funds were largely wasted due to corruption and inefficiency. General Abdulsalami Abubakar’s brief tenure did not allow time for significant reforms. Civilian administrations faced similar challenges.
During President Obasanjo’s tenure, multiple TAM contracts were awarded for refineries in Port Harcourt, Warri and Kaduna. Unfortunately, many of these projects were poorly executed, and accountability was lacking.
President Umaru Yar’Adua sought to privatise the refineries, but public opposition and policy reversals hindered these efforts. His reform agenda was further cut short by his untimely death. Similarly, President Goodluck Jonathan awarded contracts to reputable companies such as Saipem and Daewoo, but the refineries remained largely nonfunctional.
The problems in the oil sector are inherited challenges, and it is vital to avoid laying undue blame on President Tinubu. The inefficiencies within the sector result from decades of inadequate planning, corruption and poor management.
Nigeria’s four refineries, two in Port Harcourt and one each in Warri and Kaduna, have a combined installed capacity of approximately 440,000 barrels per day. However, for years, they operated at an average capacity utilisation of just 15–25 per cent. This inefficiency has left the country reliant on imports to meet 70–80 per cent of its petroleum demand.
For example, in 2017, Nigeria’s domestic demand was approximately 750,000 barrels per day, but local production fell far short of this figure. In contrast, countries such as Kuwait, Oman, and Saudi Arabia have modernised their refining capacities.
Kuwait’s Al Zour Refinery (615,000 barrels per day) and Oman’s Duqm Refinery (230,000 barrels per day) became operational in 2022 and 2023, respectively. Saudi Arabia’s Jazan Refinery, with a capacity of 400,000 barrels per day, commenced operations in 2021.
The previous governments’ inability to modernise the refineries or maintain them efficiently has been a major driver of its challenges. Addressing these issues requires transparency, consistent investments, and robust management. The current administration has shown a commendable commitment to reforming the sector.
What solutions exist for reducing the high pump price of petrol in Nigeria?
Reducing the pump price of petrol in Nigeria requires addressing systemic inefficiencies and operational challenges within the oil sector.
Nigeria’s production cost is estimated at $48 per barrel, which is significantly higher than those of countries such as Saudi Arabia and Libya, where production costs are around $10 per barrel.
This disparity is due to insecurity and other avoidable man-made unrelated costs, which amounted to $11.4 billion in the first half of 2024.
Although crude oil sells for approximately $72 per barrel, the cost of imported petrol remains high due to Nigeria’s reliance on imports and its revenue-sharing formula, where the Nigerian National Petroleum Company Limited (NNPCL) and its joint venture partners split revenues at a 60:40 ratio.
For years, the NNPCL struggled to meet Nigeria’s OPEC production quota of 2.2 million barrels per day, often producing only around 1 million barrels due to oil theft and production challenges. While production levels have improved to approximately 1.6 million barrels per day, significant shortfalls persist.
While subsidy removal has increased pump prices, it is worth noting that Nigeria’s prices remain relatively low compared to neighbouring countries like Ghana and Cameroon, where prices exceed $1.30 per litre.
A restructured political framework, a diversified economy, and a unified security apparatus are the pillars upon which Nigeria’s future must be built
To reduce pump prices, two key steps are necessary, we must increase production levels, we would be able to meet the OPEC quotas and have refining for local consumption. Also crucial is security, a secure and conducive operating environment for oil companies is required.
The leadership shown by the Minister of Petroleum in securing production facilities and stabilising operations is commendable.
How should Nigeria address the economic and security challenges posed by oil theft?
Oil theft presents significant economic and security challenges for Nigeria, requiring urgent and strategic action. The establishment of a coast guard is long overdue and it’s an essential step towards securing Nigeria’s waterways and protecting its oil resources.
The nation’s coastline stretches over 800 kilometres and is located within the Gulf of Guinea, a critical hub for global maritime trade. This strategic location exposes the country to piracy, smuggling, and oil theft, all of which undermine national revenue and security.
A well-equipped coastal guard would focus on maritime law enforcement, anti-smuggling operations and the protection of offshore oil infrastructure, complementing the broader defence role of the Nigerian Navy. Critics argue that a coast guard would duplicate the Navy’s functions, but this perspective overlooks the benefits of specialised roles.
The United States, which has successfully implemented a similar model, has expressed readiness to support Nigeria by providing training and resources for such an initiative.
Piracy and oil theft have caused significant economic losses and tarnished Nigeria’s reputation. Establishing a coast guard would help address these challenges, ensuring oversight of maritime activities and safeguarding critical infrastructure.
On the political landmines, what is the roadmap to redemption for Nigeria?
Nigeria’s challenges extend beyond the oil sector and require a holistic approach to national reform. A frank national dialogue is needed to address the ethnic and religious divisions that have shaped the country’s history.
Policies that promote inclusivity, decentralise resources and empower local economies are essential for fostering unity and a sense of belonging. The Nigerian project is far from a lost cause. However, progress demands bold leadership and systemic reforms.
A restructured political framework, a diversified economy, and a unified security apparatus are the pillars upon which Nigeria’s future must be built. President Tinubu has demonstrated the capacity to drive meaningful change. Two key reforms stand out, local government autonomy:
While this reform remains incomplete, it is a critical step toward strengthening grassroots governance. Conducting local government polls under INEC’s supervision would solidify this progress. Subsidy removal, although painful, this decision was necessary to avert a national economic crisis.
Why is NNPCL always in the news for financial scandals?
The NNPCL has faced allegations of financial mismanagement since its inception under Festus Marinho in 1977. As the custodian of Nigeria’s oil wealth, its operations have historically been opaque, fostering suspicions of corruption. Subsidy claims, in particular, are frequently seen as a conduit for embezzlement.
The sheer scale of its financial dealings and lack of public accountability often make it a target for scrutiny. Critics argue that systemic corruption and weak oversight allow these scandals to persist.
The NNPCL’s role as Nigeria’s primary oil company places it under constant pressure from external bodies, which sometimes exaggerate figures to sensationalise issues.
Subsidy calculations, for instance, are complex and often misinterpreted by outside parties, leading to inflated claims against the company. NNPCL operates in a challenging environment and should not be solely blamed for systemic inefficiencies or political interference.
Transparency reforms and independent audits could help resolve these disputes and the current management of NNPCL has started auditing the company accounts yearly, a good omen.
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