By DAYO ADESULU
Despite being Africa’s largest producer of crude oil, Nigeria generates a mere 5% of the total revenue from its crude oil exports, highlighting significant inefficiencies in the country’s oil sector.
This revelation was made by Prof. Kayode Soremekun, a Political Science professor at the University of Lagos, during a one-day symposium themed “Nigerian Petroleum Industry: The Way Forward” held in Abuja on Thursday. The event was organized by Class Masters Ltd in partnership with the Nigerian National Petroleum Company Limited (NNPCL).
Revenue Leakage in the Oil Sector
Prof. Soremekun pointed out that certain components of Nigerian crude oil—such as paraffins, sulfur compounds, aromatics, and trace metals—are retained by refining countries, and their associated revenues are not remitted to Nigeria’s federation account.
He also lamented the country’s over-reliance on crude oil exports without significant value addition through local refining or processing, which he said results in monumental financial losses:
“Nigeria is only getting 5% of what we should be getting from exporting crude oil. We continue to export raw materials and, in the process, export jobs to other countries.”
Challenges in the Petroleum Industry
- Focus on the Upstream Sector: Nigeria’s focus on the upstream sector of oil production has left the midstream and downstream sectors largely untapped, further limiting potential revenue streams.
- Disruptive Politics: Prof. Soremekun emphasized that political interference has stifled progress and hindered the resolution of critical issues, including environmental degradation in the Niger Delta.
- Lack of Expertise: He stressed that limited knowledge about the intricacies of the oil industry has left Nigeria operating as an “ignorant outsider” in its most significant sector.
Recommendations
Drawing comparisons with oil-producing nations like Norway, Indonesia, and Malaysia, Prof. Soremekun suggested adopting their models for managing petroleum resources. These include diversifying involvement across the upstream, midstream, and downstream segments of the sector and fostering value addition locally.
NNPCL’s Role and Current Operations
The NNPCL currently operates under the Direct Sale Direct Purchase (DSDP) program, which swaps crude oil for refined products. While this program has ensured some level of resource utilization, it has also allowed other byproducts of crude oil to benefit refining countries disproportionately.
Industry Experts Call for a Paradigm Shift
Paddy Ezeala, Managing Director of Class Masters Ltd, highlighted the need for stakeholders to address emerging challenges in the industry, including insecurity, environmental issues, and energy transitions:
“The public should be aware of these challenges, and people should be environmentally conscious. Insecurity is affecting oil production, and we can barely meet our OPEC quota.”
Ezeala also noted that discussions during the symposium were aimed at identifying strategies to make the oil sector more inclusive and economically viable for Nigeria.
Key Takeaways
- Nigeria earns only 5% of potential revenue from crude oil exports.
- Components of crude oil not accounted for in revenue create significant financial losses.
- Focus on value addition, local refining, and diversification in the petroleum sector is urgently needed.
- Energy transition and insecurity are emerging challenges that require immediate attention.
