By Mark Isuma
With no functional refineries and wholly dependent on import with its attendant economic implication, the Nigerian National Petroleum Company Limited’s drive to reverse this practice that has created economic losses in the country would inevitably reroute the country to the path of growth.
It is expected that in a few months, the Port Harcourt refinery will produce, in full capacity, fuel for local consumption.
Already, the Area-5 Plant of the refinery would start refining 60,000 barrels of crude oil daily after testing the mechanical rehabilitation work that has been carried out is completed.
At the moment, the refinery has witnessed installation of vital components, with licensor inspection and catalysts done.
According to the President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, the PH refinery is “receiving crude because I have been in Port Harcourt and was at the refinery with some of our members. The testing is going on.”
There cannot be better news for Nigeria than that. The fall in the value of the naira is directly proportional to the volume of import, and refined fuel takes a huge chunk of the country’s foreign exchange.
Latest figure from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) showed that local consumption of petrol is 44.3 million litres daily.
As of 2022, fuel import into the country costs a staggering $1.04bn annually, taking a huge dent on the country’s value of the naira.
The implication is that the country is under stress in view of demands by importers to access foreign exchange amid shortage of liquidity.
It’s expected that while 12 states will derive direct benefits from the 60,000bpd refinery, the second phase, which would be to refine 150,000bpd before reaching 210bpd, which is the full capacity of the PH refinery, will further push the NNPCL’s quest for energy security for Nigeria.
The 150,000bpd would start to be refined in the fourth quarter of 2024, according to the Group Chief Executive Office of the NNPCL, Mele Kyari.
“In our quest to ensure that this refinery is re-streamed to continue to deliver value to Nigerians, we made a promise that we will reach a mechanical completion of phase one of the rehabilitation project by the end of December and get the other plants running in 2024. We have kept those commitments,” Kyari stated.
He added that “We are done with phase one. We will complete phase two as promised within 2024, maximum – the last quarter of 2024.”
Industry players and analysts have hailed the NNPCL’s drive and agree that local refining of petrol will lead to a drastic reduction in losses annually suffered by the country due to shortage of liquidity.
Nigeria’s reliance on imports for refined products means rising demand for foreign exchange for import, which impacts negatively on the naira, consequently denying the country the full benefits of being an oil producing nation.
The demand for foreign currency for import has often exposed the naira to volatility, which is gravely responsible for the current freefall of the naira
Of all imports into the country, oil import takes a chunk of the forex as importers source for foreign currency in order to carry out oil importation transactions.
But with NNPCL’s prime arrangement to refine all locally consumed refined fuel, the country will be saved from the bloody nose it frequently suffers from the fall of the naira due to importers’ frantic search for the greenback.
There will be no need for dollars to import fuel when these refineries start working and NNPLC’s bold initiative will strengthen the naira, leading to the balance of trade and payment for the country.
The National Secretary of the Independent Petroleum Marketers Association of Nigeria, Chief John Kekeocha, puts it succinctly when he said, “the cost of importing refined products will be eliminated” thus ending the quest for dollars for importation.”
The establishment of refineries in the country will not only contribute to reducing imported inflation and associated costs but it also have the potential to attract foreign investments, further bolstering exchange rate stability.
In addition, the presence of refineries is an indication of Nigeria’s commitment to developing its domestic refining capacity, which can instil confidence in international investors.
It should be noted that increased foreign direct investment brings in foreign currency inflows, which can strengthen the country’s foreign exchange reserves and positively impact the exchange rate.
Interestingly, foreign investments do not only provide financial stability but also bring with it expertise, technology, and best practices, which will further enhance the refinery’s operations and the overall economy.
There would also be expansion of the petrochemical industries with direct positive effect on agriculture as a result of the importance of the byproducts from oil refining
Investment in the petrochemical industry will equally bring about a profound effect in the economy because of the expansion of the private sector.
In fact, NNPCL will solve a critical challenge in the country through ensuring a nation’s energy independence. It’s expected that by processing crude oil into various refined products such as gasoline, diesel, and jet fuel, the country will be free from relying on external energy sources thus reducing the pressure on the naira.
• Usuma writes from Calabar
