Nigeria embarrassingly exports crude oil for several years, only to import refined products at a hefty price, causing trade deficits and currency depreciation. Meanwhile, the Dangote refinery has signalled that private sector involvement in the oil and gas industry can attract unimaginable investments, reduce import costs, and even create employment opportunities for Nigerians.
Despite the refinery’s potential, certain government agencies have become obstacles to progress. For example, Farouk Ahmed, the head of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), made remarks questioning the quality of oil products and the licensing of private refineries like Dangote’s. These unfounded accusations against private enterprises undermine their efforts to alleviate the nation’s reliance on oil imports. According to oil and gas expert Dele Kelvin Oye, such comments undermine the refinery’s capacity and the broader efforts of private entities to ease the country’s oil import burden.
The midstream and downstream authority should be shameless in criticising the Dangote refinery. Despite having the 11th largest oil reserves in the world, the country’s lack of refining capacity forces the government to import a large portion of its refined oil, reducing its revenue generation potential. The Nigerian government owns four major oil refineries, but none functions optimally.
Crude oil is one of Nigeria’s major revenue mines but its minute contribution of 5 percent to the nation’s GDP in 2023 is far from this reality. The oil sector’s poor contribution to the GDP last year could be attributed to the reinvestment of its revenue in oil importation.
Meanwhile a cursory look at the tremendous results of private sector inclusion in other sectors like fintech, and agriculture shows that its involvement in the oil and gas sector would bolster the economy, too. For instance, the private entities in Fintech have improved financial services in the country and stimulated the circulation of foreign investment in this sector. Interswitch’s entrance in 2002 bolstered the involvement of other fintech companies like Kuda, Palmpay and the likes.
Privatisation Cuts Government’s Cost
Nigeria can no longer afford to rely on fuel importation, which has continually drained its purse. Nairametrics reported that Nigeria spent N23.5 trillion on fuel importation in five years. It was especially costly in 2022 and 2023, consuming more than half of the total revenue incurred during this period. However, the emergence of the Dangote refinery offers a promising solution, cutting costs and facilitating the diversion of capital to other sectors.
Meanwhile, increased private ownership of oil and gas facilities could propel efficiency, drive innovation, and inspire competition, inspiring a resourceful and efficient sector. A good example is Angola where public-private involvement in the oil sector has attracted foreign investment. Likewise, its collaborative efforts in strengthening the nation’s refining capacity is believed to potentially make it one of the biggest regional oil suppliers in Southern Africa.
In addition to a bolstered economy, Aliko Dangote, during its commission in 2023, said his refinery would provide over 100,000 jobs, significantly contributing to the government’s efforts to boost employment.
The private sector’s ownership of oil and gas facilities is prospective in building an inclusive economy. It is time for the Nigerian government and oil-related regulatory parastatal to unlock the nation’s economic potential by creating a thriving environment for inclusive entrepreneurship in the oil and gas sector.
