The Ongoing Scandal of Nigeria’s State-Owned Refineries
Nigeria’s state-owned refineries have long been a symbol of mismanagement and corruption. Over the past decade, more than $18 billion has reportedly been spent on their rehabilitation, yet no tangible results have emerged. This staggering figure has once again drawn the attention of the House of Representatives, which has resolved to investigate the matter. While some may dismiss this as just another well-worn scandal, it is crucial to revisit the issue. It is not about punishing individuals but about addressing a systemic problem that has eroded public trust and national integrity.
The House’s investigation should be transparent, with findings made public to restore accountability in the oil sector. Recently, the Senate also conducted a hearing on the state of the refineries, highlighting the growing concern over their condition. According to reports, the $18 billion allocated for rehabilitation between 2010 and 2024 has yielded little to no progress. This is not surprising, given the history of mismanagement and corruption that has plagued the sector for years.
Adding the Turn-Around-Maintenance (TAM) costs from before 2010, the total expenditure surpasses $20 billion—equivalent to the cost of the Dangote Refinery, one of Africa’s largest. This amount is also half of Nigeria’s foreign reserves, which could have been used to build a new power grid to address the country’s chronic electricity shortages.
Despite the scale of the issue, it is unlikely that many Nigerians will be shocked by these revelations. Corruption has become part of daily life, and we have grown accustomed to repeated probes into the oil sector. However, none of these investigations have led to meaningful change or accountability.
One of the most notable efforts to address the issue was the task force established by President Goodluck Jonathan in 2012, led by Nuhu Ribadu, a respected anti-corruption figure. His report uncovered a vast web of mismanagement and fraud, estimating that Nigeria lost up to $35 billion over a decade due to corrupt practices. Key findings included:
- State oil firm selling oil to itself at low prices, costing the treasury $5 billion.
- Failure to collect royalties from major oil companies like Shell and Sinopec, resulting in a $3 billion shortfall.
- Loss of hundreds of millions in signature bonuses on new deals.
- Unregulated contract awards by oil ministers without proper tender processes.
The report emphasized that the refineries had not been properly maintained for over 15 years, necessitating changes in ownership and business models to turn them around.
This $18 billion TAM fraud is just one example of the ongoing mismanagement in the oil sector. The lack of consequences for those involved ensures that the cycle continues. Unlike Brazil’s Petrobras scandal, where high-profile figures were held accountable and significant fines were imposed, Nigeria’s oil sector remains a haven for the powerful.
NNPC, the state oil company, is essentially the state itself. Unraveling the secrets of the petroleum sector would expose the inner workings of the Nigerian government. Presidents since 1999 have taken control of the petroleum ministry, often using it for personal gain. For instance, President Olusegun Obasanjo initiated this trend, while Muhammadu Buhari justified his actions by claiming he was fixing the industry. Tinubu, too, serves as his own petroleum minister.
Privatization has been proposed as a solution, with some stakeholders, including NNPC’s Group CEO Bayo Ojulari, advocating for the sale of the refineries. A report estimated that the four refineries have consumed over $25 billion over three decades. The NNPC itself revealed that building one refinery with the same capacity as Port Harcourt’s 210,000 barrels per day would cost between $7 billion and $12 billion.
This means that the wasted money could have built at least three new refineries. While the House’s investigation is a step in the right direction, it is not enough. President Tinubu must take decisive action to privatize the refineries and break the cycle of corruption.
Ribadu, now the National Security Adviser, should advise the President on the lessons learned from his earlier probe. Tinubu has a real opportunity to sell off the refineries and begin the process of reforming the sector. The time for action is now.
