Nigeria stands a very good chance of benefiting from the current plunge in international crude oil prices if managers of its economy, especially those in the oil and gas sector, take a holistic view and seize opportunities in the West African market.
The downstream market in West Africa is largely underdeveloped and mostly government-controlled which has often led to inefficiencies that leave most countries depending heavily on import to fulfil their requirements for petroleum products.
For Africa’s biggest oil-producing country, this is a golden opportunity to assume regional dominance following the move by the federal government to stop petrol subsidy and deregulate the downstream sector.
Nigeria is the second-largest producer of oil in Africa, producing over 1.5 million bpd as at May 2020 while proven crude oil reserve is also estimated at about 37 billion barrels as at 2015. Nigeria boasts of about 29 percent of the continent’s crude reserves (the second in Africa).
Playing regional dominance in the West Africa petroleum products market will enable Nigeria’s downstream sector to act as an enabler to other critical industries such as petrochemical, construction, agricultural and other industrial sectors.
“The West African market holds significant potential as refineries such as Ivory Coast, Gabon and Senegal cannot meet current demand for refined products in the region, estimated at 39 billion litres. There is an opportunity for potential uptake by neighbouring countries if the market has Nigeria’s refined products readily available,” multinational professional services network with headquarters in London,
PricewaterhouseCoopers (PwC) said in a report titled Nigeria Refining Revolution.
PwC noted that this shift will see Nigeria become a net exporter of refined products and the refining hub of West Africa by the start of the next decade.
The advent of Dangote refinery – which is set to produce 650,000bpd of refined products – and other modular refineries will significantly impact the current landscape in the downstream sector which upon completion will exceed domestic consumption levels and subsequently export excess refined products to neighbouring African countries.With oil price currently trading at $42, Aderonke Onadeko, industry expert with Nigeria Natural Resource Charter (NNRC) said Nigeria would have switch to refining more petroleum products locally and supplying them to the rest of West Africa sub-region and Africa at large, which would earn more revenue for the country.
In a country bogged down by under-development despite producing about two million barrels of crude oil daily and boasting of about 37 billion barrel reserves, poor governance of the oil and gas sector among other challenges has resulted in heavy debt as Nigeria’s external debt currently hovers around $27.6 billion, while domestic debt has hit N6.5 trillion as GDP is expected to contract by 3.5 per cent year on year in 2020.
Stakeholders have asked the government to speedy the kick-off of full deregulations of the downstream sector which has been crippled by poor pricing, obsolete regulations, undue government interference, harsh operating environment, dearth of infrastructure, insecurity, and other challenges, which continue to deter investment.Other industry experts have also said the present precarious situation of the sector has taught Nigerian regulators that investment is no respecter of political parties, it only responds positively to business-friendly environment, where financiers are certain about the short or long term outlook of their investment, especially under a clear regulation backed by law.
With a comprehensive, holistic and modern downstream sector, the federal government, especially the Buhari-led administration would not only achieve its campaign promises of lifting over 10 million Nigerians out of poverty through meaningful direct and indirect employment, but it will also develop by-products that would fast-track industrialization will be made available for sectors like agriculture.