They Laughed at Obasanjo — Now Nigeria’s $1.5bn Refinery Failure Proves the Critics Right
For years, critics scoffed when former President Olusegun Obasanjo warned that Nigeria’s state-owned oil refineries would never work under government control. They said he didn’t understand the economy and accused him of being a political failure with no grasp of modern energy realities. Today, that criticism looks less like bitter political rhetoric and more like uncomfortable foresight — especially after the latest admission by the Nigerian National Petroleum Company Limited (NNPC Ltd.) that the rehabilitation of the Port Harcourt Refining Company (PHRC) has cost about $1.5 billion with little or no return.
In July 2024, the NNPC announced the reopening of the PHRC, hoping that decades of neglect could finally be overcome. But barely a year later, the facility was shut down again, and NNPC’s newly appointed Group Chief Executive Officer, Bayo Ojulari, openly acknowledged that the refinery was operating at a monumental financial loss — essentially draining public funds without generating meaningful output.
This moment — when the state’s own oil company admits defeat — is a watershed for Nigeria’s energy policy. It is a confirmation of what seasoned analysts, private sector experts, and even former leaders have long argued: the country’s refineries should never have been run as government enterprises, and the ongoing attempt to revive them has been an economic disaster.
The Hard Truth: Billions Down the Drain and Nothing to Show
NNPC Ltd.’s admission came during comments by Bayo Ojulari, who revealed that the refineries — including Port Harcourt — were losing money on operations to the tune of hundreds of millions before being shut down. For instance, at one point the company was losing between $300 million and $500 million per month while the Port Harcourt plant operated at under 40% capacity, processing crude inefficiently and producing far less fuel than it consumed.
This revelation is significant because it starkly contradicts the long-held belief that simply pouring more money into old facilities would yield a return in fuel production and greater energy independence for Nigeria. Instead, decades of so-called “turnaround maintenance” have devoured scarce public resources without producing enough petrol, diesel, or kerosene to meet domestic demand.
Even more ironically, diesel — not petrol — has been the main product evacuated from the Port Harcourt facility in recent months, and that was only possible because the fuel was stockpiled before the latest shutdown. Official data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) shows that the refinery continues to supply diesel from existing stocks, even though no actual refining operations are currently taking place.
Obasanjo’s Warning Was Not Political Ploy — It Was Vision
Many observers today now echo the sentiments made years ago by Obasanjo and industry critics: government control of refineries — especially without commercial discipline and modern technical expertise — is economically unsustainable. Obasanjo had suggested that public-sector management of refineries lacked the incentives and efficiency found in private enterprises — a claim that now seems prophetic given the staggering losses and repeated shutdowns.
This isn’t simply about mismanagement — it’s about structural dysfunction. Nigeria’s four major state-owned refineries — Port Harcourt, Warri, and Kaduna among them — have a combined nameplate capacity of over 400,000 barrels per day, yet they have historically failed to deliver enough output to justify their costs.
Efforts to rehabilitate these facilities have spanned decades, with billions spent in fits and starts, yet results remain limited and inconsistent. The Port Harcourt plant, which was celebrated upon its reopening in late 2024, has now been idle for months as it awaits both technical overhaul and financial justification.
Politics Over Economics — And Why It Matters
It’s important to acknowledge that the latest push to revive Nigeria’s refineries was not purely an economic decision — it was also political. Pressure from various quarters, including local communities, labour unions, and politicians who view refinery operations as symbols of national pride, played a role in pushing NNPC to reopen these facilities despite long-standing technical challenges.
Yet politics cannot substitute for transformative energy policy. Policies must respond to economic realities, and these realities make clear that continuing to pour taxpayer funds into loss-making state refineries is indefensible. Valuable resources that could have been invested in infrastructure, education, healthcare, or even modular and private refining capacity were instead sunk into facilities that cannot generate sustainable output.
Privatisation: The Case Grows Stronger
Nigeria’s former Vice President, Atiku Abubakar, has seized on NNPC’s admission as vindication of his long-standing call for full privatisation of the country’s refineries. He argues that the continual state ownership model has failed and that private sector investors with industry expertise would be better positioned to manage and operate these assets profitably.
This position isn’t fringe — it’s supported by many industry stakeholders, including oil marketers and manufacturers who have described the state plants as economic drains and liabilities rather than assets. Some go further, saying that Nigeria would have been better served by selling these facilities before rehabilitation plans ballooned into multi-billion-dollar endeavours that yielded little return.
Privatisation proponents argue that private investors bring not only capital but also technical competence, operational discipline, and management efficiency — elements that have historically been absent or weak in state-run enterprises. With Nigeria struggling under fiscal pressures, currency volatility, and mounting debt, the argument for private participation is no longer theoretical — it’s a pragmatic economic necessity.
Why Privatization — And Not Just Rehabilitation — Matters
Rehabilitation, by itself, cannot fix a problem that is fundamentally structural. Under state ownership:
Refineries have been starved of sustained funding and technical expertise. Payment delays and contract disputes have slowed progress, and contractors have sometimes withdrawn due to lack of funds.
Maintenance culture is weak, leading to recurring breakdowns. Refineries repeatedly shut down not because of one problem, but because fixing one component often reveals deeper, hidden issues across the plant — a tell-tale sign of accumulated neglect.
Political interference often overrides commercial logic. Decisions on operation and shutdowns are influenced by public pressure and political considerations rather than market realities.
In contrast, private investors are driven by market incentives — meaning they must ensure that plants operate efficiently, recover costs, generate profits, and satisfy shareholders. This alignment of incentives is crucial if Nigeria’s refining sector is to produce fuel, earn foreign exchange, create jobs, and contribute to national energy security.
Impact Beyond Economics — Jobs and Energy Security
Critics of privatization often argue that selling national assets will lead to job losses and foreign control. But evidence from other countries suggests that well-structured private investments can preserve jobs and even expand them, especially when facilities become operational, profitable, and integrated into global supply chains.
Moreover, Nigeria’s energy security is at stake. While Dangote’s privately financed refinery in Lagos has already made significant contributions to domestic fuel supply, state-run plants remain dormant and costly. A shift to private management could help Nigeria reduce its dependence on imported refined products and stabilise local fuel prices — outcomes that have eluded policymakers for years.
Conclusion: A Wake-Up Call, Not a Defeat
The NNPC’s admission that reopening the Port Harcourt refinery was a waste of scarce resources is not just a comment on one facility — it’s a wake-up call for Nigeria’s energy strategy. At a time when the country faces economic headwinds, currency volatility, and growing debt, the status quo cannot stand.
Rather than defending a failing model under the guise of national pride or political posturing, Nigeria must confront hard truths:
State ownership of refineries has not worked.
Billions have been wasted with no sustainable fuel production.
Privatization, if properly structured, offers a better path forward.
Those who once dismissed Obasanjo’s warnings may now realize that his critics were not simply being cynical — they were recognising a longstanding structural problem that Nigeria must finally address if it hopes to build a resilient and prosperous energy sector for the future.
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