Emeka Okoroanyanwu
Group Managing Director of Nigeria National Petroleum Corporation (NNPC), Mele Kyari, has said that the country plans to end oil-for-fuel swap system which he said has saved the country cUS$1bn a year, as soon as local refining capacity improves by 2023.
Kyari who spoke at a virtual conference at the African Refiners and Distributors Association conference said the government has been assisting the private sector to develop modular refineries.
A few private refineries are expected to come on stream soon. They include a 100,000-barrel capacity refinery located near Port Harcourt, the Niger Delta Petroleum refinery in Delta state and six other modular refineries located in other parts of the country.
There is also the 650,000 barrels per day capacity Dangote Refinery expected to come on stream next year.
The NNPC Managing Director also noted that he expected NNPC’s refineries to be fully revamped and running again by 2023 through partnership with private companies.
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About 90% of the refined petroleum products consumed in Nigeria are imported. The refineries located in Kaduna, Warri, and Port Harcourt with a combined capacity of 445,000 bpd have long operated at low levels due to many years of underinvestment and poor maintenance.
In 2019, the combined capacity utilization of Nigerian refineries fell to 2.5%, an all-time low annual activity level since 1998.
Nigeria has used a few methods in the last decade to meet its domestic fuel needs. One of such methods is swaps which helped the country maintain the flow of fuel into the country especially since the open account system was stopped.
There are, however, concerns that countries tend to enter into oil-backed barter deals like swaps only in desperate times and in such difficult times, officials may struggle to negotiate hard terms with the traders and refiners on the other side of the table.
Many analysts have also questioned the probity of the swap deals as many believe they are not properly structured, monitored and audited.