Africa’s largest economy, Nigeria, amidst the plenty of natural resources the country is blessed with, has, for many years, zeroed its focus on crude oil. In fact, in 2021, crude oil topped the country’s exports with N14.41 trillion or 76% of the year’s revenue. In the continent, Nigeria has established itself as Africa’s major producer of crude oil with 18 operating pipelines and a produce of over 1.4 million barrels per day in May 2022.
State of play
Regardless of Nigeria’s oil abundance, top of the country’s imports last year, 2021, was Premium Motor Spirit (PMS) also known as Petrol, at N3.97 trillion representing 19% of the total imports.
Nigeria is importing such high amounts of a crude oil derivative due to the overwhelming oil related crisis that has made the country’s biggest export a burden of economic concern to the federal government.
The prevailing issues include fuel subsidies, lack of transparency, corruption in regulatory bodies, moribund refineries, etc.
Ultimately, the shortcomings of the Nigeria National Petroleum Company (NNPC) highlight the continuous importation of fuel despite the country’s oil abundance.
Nigeria has been paying fuel subsidies since the 1970s to soften the financial impact of the importation of fuel on its citizens. However, fuel prices have skyrocketed from N65 per liter in 2007 to N167 per liter in 2022. And fuel subsidy to be paid for 2022, according to President Buhari’s request to the Nigerian Senate, is N4 trillion. The failure of the NNPC to get Nigeria’s four refineries fully functional has resulted in the continuous payment of fuel subsidy.
Lack of transparency
In the 45 years of NNPC’s operation in the country, the company just published its first audit in 2020 and it is yet to publicize the financial statement of 2021. This is key to enable foreign investors to make informed decisions on how to proceed with investing in the country.
Sequel to the lack of transparency, NNPC, like other sectors in the country, has corruption at the top of its shortcomings. During the Goodluck Jonathan’s administration, KPMG, a company which specialized in tax, financial audit, and advisory, audited the NNPC on the President’s orders. KPMG found that the NNPC had an excess of N28.5 billion in subsidy-related claims.
Equipped with four refineries, with a combined capacity of 445,000 barrels per day, these refineries have produced no fuel in the last few years. Yet an NNPC report says that the company spent N100 billion in 2021 on the rehabilitation of these refineries.
Reports say that NNPC in April 2022 paid “$3.68billion out of the $4.689 billion cash call debt to five international oil companies that are its joint venture partners.” The company serviced the debt from the N2.992 trillion generated by the company between January – November 2021; regardless of NNPC failing to meet its projected income of N4.564 trillion. Another shortcoming of the NNPC.