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Olaitan Olutimehin Johnson 7th October,2024

The Nigerian National Petroleum Company Limited (NNPCL) finds itself grappling with a complex situation: on one hand, there is the unfinished business of reviving government-owned refineries, most notably the Port Harcourt Refinery, which has seen countless delays; on the other, NNPCL is becoming increasingly involved as an intermediary between the newly operational Dangote Refinery and independent marketers. This dual focus reveals an underlying tension within Nigeria’s oil sector—a tension that has broad implications for energy security, pricing stability, and economic resilience.

The Long-Awaited Revival of Government-Owned Refineries

One of the most pressing challenges NNPCL faces is the continuous postponement of getting the government-owned refineries—specifically, the Port Harcourt Refinery—back to operational status. These refineries, once the pride of Nigeria’s domestic fuel production, have for years failed to produce any significant output due to mismanagement, lack of maintenance, and underinvestment. The Port Harcourt Refinery’s rehabilitation, originally projected to be completed years ago, has become a symbol of unfulfilled promises. Despite repeated reassurances, each announced operational date has ended in another delay.

These continuous postponements have frustrated both industry players and the general public. The expectation was that the refurbishment of the government-owned refineries would reduce Nigeria’s dependence on imported refined products and help stabilize the supply of Premium Motor Spirit (PMS). Yet, every new missed deadline only emphasizes NNPCL’s struggle to bring this vision to life. The prolonged delays mean that Nigeria continues to depend heavily on imported petrol, draining valuable foreign exchange reserves and subjecting the domestic market to international price volatility.

NNPCL’s inability to meet its refinery deadlines has broader implications for Nigeria’s energy landscape. The delays perpetuate an expensive reliance on imports, making Nigeria vulnerable to fluctuations in global oil markets and depriving the country of the opportunity to establish true energy independence. This situation directly impacts fuel prices across the nation, often resulting in high costs at the pump that ripple through other sectors of the economy, driving up the cost of goods and transportation.

Stepping in as the Intermediary Between Dangote and Independent Marketers

While the government refineries remain stuck in limbo, NNPCL has increasingly stepped in to play a different role—acting as an intermediary between Dangote Refinery, Africa’s largest private refinery, and the nation’s independent petroleum marketers. This new role comes with its own set of opportunities and challenges, signaling a pivot in NNPCL’s strategy amidst the delayed progress on their own refineries.

With Dangote Refinery now operational and producing petrol, NNPCL initially positioned itself as the sole buyer of PMS from the refinery, ostensibly to ensure a stable and streamlined supply chain. However, recent reports suggest that NNPCL is reconsidering this exclusive role. Instead of acting as the single point of purchase and distributor, NNPCL may opt to share responsibility with independent marketers, creating a more open, albeit complex, market dynamic.

This move raises several questions. Is NNPCL stepping away from its primary mandate to prioritize the rehabilitation and operation of the nation’s own refineries? By focusing on acting as a middleman between Dangote Refinery and independent marketers, NNPCL may be indirectly admitting its inability to swiftly restore the government-owned refineries. This evolving role, while seemingly practical in light of current fuel demands, also indicates a strategic shift from being a production-centric entity to more of a logistics and supply-chain facilitator.

For independent marketers, having direct access to Dangote’s output could mean more competition and, ideally, better pricing. However, without NNPCL’s coordinating hand, the market could become prone to price wars and supply inconsistencies, ultimately harming the average consumer. This uncertainty puts additional pressure on NNPCL to manage relationships and market expectations carefully, even as it attempts to figure out its own production capacities.

Broader Implications for Nigeria’s Energy Sector

NNPCL’s current situation presents a paradox: it’s an organization with significant potential and ambition but is caught between two competing roles. On one hand, it aims to fulfill the national goal of restoring government refineries to operational status—a crucial step towards reducing reliance on fuel imports and gaining true energy independence. On the other hand, the company is leaning into its role as an intermediary, seemingly to cover gaps created by the ongoing failure to rehabilitate its refineries.

This dual focus dilutes NNPCL’s capacity to make meaningful progress on either front. The delays in refinery operations mean that Nigeria continues to lose out on potential value-added benefits from refining its crude oil domestically. Meanwhile, by inserting itself as a middleman between Dangote and independent marketers, NNPCL risks entrenching itself in a complex intermediary role instead of developing its own production facilities.

Moreover, these moves have critical implications for fuel pricing and availability across Nigeria. The reliance on a single private entity—Dangote Refinery—for refined products creates a potential monopoly scenario, where market dynamics are subject to the pricing strategies and production decisions of one company. If NNPCL is unable to fully rehabilitate its refineries, this concentration of power in a single private refinery could lead to unstable pricing and limited control for the government over critical energy supplies.

Conclusion: A Need for Focused Strategy and Decisive Action

NNPCL’s current dual role is emblematic of the broader challenges facing Nigeria’s oil and energy sectors. The continuous postponement of government-owned refineries, particularly the Port Harcourt facility, highlights a persistent inability to achieve energy independence despite immense national resources. At the same time, the evolving intermediary role between Dangote Refinery and independent marketers points to a stopgap solution rather than a long-term strategic approach.

To address these dual challenges effectively, NNPCL must prioritize and clarify its focus. The government refineries must either be brought online without further delays or realistic alternatives must be developed, including potential partnerships or divestitures that could make these refineries functional. On the other hand, if NNPCL decides to continue acting as a mediator in the petrol supply chain, it must ensure transparency, fair pricing, and a stable supply to benefit both marketers and consumers.

Ultimately, NNPCL’s ability to move beyond its current position of “two mouths”—speaking both about refinery rehabilitation and private partnerships—will determine its role in shaping Nigeria’s energy future. By adopting a focused, strategic, and action-oriented approach, NNPCL can finally fulfill its mandate of securing energy stability for Nigeria, thereby laying the foundation for long-term economic growth and national development.