Nigeria’s State Refineries: A Monumental Financial Drain Despite Massive Investment
Nigeria’s national oil company, the Nigerian National Petroleum Company Limited (NNPC), has poured an estimated N13.2 trillion (approximately $10 billion USD, based on typical exchange rates) into the country’s three state-owned refineries over the 2023 and 2024 period. This substantial capital injection was primarily allocated to fund turnaround maintenance (TAM) initiatives, ongoing operations, and associated banking fees. However, despite this significant financial commitment, the refineries have continued to incur heavy losses and have failed to operate at commercially viable levels.
The stark reality of the situation was publicly acknowledged by the current Group Chief Executive Officer of NNPC, Mele Kyari, who described the refineries as a “monumental loss” to Nigeria. Speaking at the Nigeria International Energy Summit 2026 in Abuja, Kyari offered a candid assessment of the commercial challenges plaguing these long-troubled assets.
A Deepening Financial Hole
Financial statements from NNPC reveal a concerning trend of escalating debt. In 2023, the combined indebtedness of the Port Harcourt, Warri, and Kaduna refineries to the national oil company stood at approximately N4.52 trillion. By the close of 2024, this figure had ballooned to N8.67 trillion, bringing the total financial injection over the two years to an alarming N13.2 trillion.
NNPC’s financial reports attribute these rising balances to the continuous funding of refinery operations and bank charges. These expenses were incurred even as previous leadership made concerted efforts to revive the moribund facilities. However, Kyari’s successor indicated that these attempts were largely a futile expenditure of resources.
“The first thing that became clear, and I want to say this very clearly, is that we were running at a monumental loss to Nigeria,” Kyari stated. “We were just wasting money. I can say that confidently now.” He further elaborated that public frustration regarding the refineries was understandable, given the vast sums invested over the years and the persistent hope that domestic refining would alleviate fuel supply shortages.
Uneven Distribution of Funding and Performance
The financial burden has not been evenly distributed among the three refineries:
- Port Harcourt Refinery: This facility has absorbed the largest portion of the funding. Its obligations to NNPC surged from roughly N1.99 trillion in 2023 to N4.22 trillion in 2024, an increase of over N2.22 trillion within a single year. Crucially, despite this massive outlay, the refinery recorded no receivables in either year, indicating that the funds advanced for maintenance and operations were not recouped through refinery revenues.
- Warri Refinery: The amount owed by the Warri refinery to NNPC rose from approximately N1.17 trillion in 2023 to N2.06 trillion in 2024. While Warri had recorded N81.64 billion in amounts owed to it by other NNPC entities in 2023, suggesting some limited internal activity, this entirely disappeared in 2024 as costs escalated and operations failed to generate substantial income.
- Kaduna Refinery: This refinery, which has grappled with persistent operational and security issues, saw its obligations climb from about N1.36 trillion in 2023 to N2.39 trillion in 2024. This increase reflects ongoing expenditures on maintenance, staffing, security, and financing costs during its turnaround maintenance phase.
Operational Inefficiencies and Lack of Recovery Path
Kyari revealed that despite the substantial financial inputs, the refineries were consistently supplied with crude oil, yet their performance remained exceptionally weak. “We were pumping crude into the refineries every month. But utilisation was around 50 to 55 per cent. We were spending a lot of money on operations and contractors. But when you look at the net, we were just leaking away value,” he explained.
What troubled the new management most, according to Kyari, was the absence of a clear and credible strategy for recovery, notwithstanding the scale of investment. “Sometimes you make a loss during investment, but you have a line of sight to recovery. That line of sight was not clear here,” he noted. The immense pressure stemming from public expectations and the significant financial losses prompted one of the new administration’s initial major decisions: to halt refinery operations. This measure was taken to prevent further value erosion and to allow for a thorough reassessment of the assets.
A History of Intermittent Operations and Skepticism
The financial statements highlight the ongoing challenge of translating years of spending into viable, self-sustaining operations. As of the end of 2024, the three refineries collectively carried N8.67 trillion in outstanding obligations to NNPC, underscoring the financial weight of the turnaround maintenance program.
The PUNCH recalls the Port Harcourt refinery, with a 60,000 barrels per day capacity, resuming operations in November 2024 after an extended period of inactivity. At the time, the former NNPC GCEO had stated that the rehabilitated complex was operating at 70 per cent of its installed capacity, with projected outputs of diesel, fuel oil, gasoline, kerosene, and low-pour fuel oil. This was expected to contribute approximately 200 trucks of petrol to the Nigerian market daily. However, the facility was reportedly shut down again in May 2024, shortly after the former GCEO’s departure.
Similarly, the Warri refinery, declared open in December, reportedly became inactive again within a month of its claimed reopening. The former GCEO’s plans to reopen the Kaduna refinery and the new Port Harcourt refinery complex could not be realized before his tenure ended.
This pattern of recurring issues has led to significant skepticism. Last year, Alhaji Aliko Dangote, President of the Dangote Group, suggested that the government refineries might never function effectively, despite an estimated $18 billion spent on them. Former President Olusegun Obasanjo echoed similar sentiments, questioning the NNPC’s persistent claims of revamping the plants when their operational viability seemed increasingly doubtful.
Calls for Divestment and NNPC’s Stance
In light of these persistent challenges, the organized private sector has advised the NNPC to divest from the refineries, arguing that they have become significant drains on the nation’s resources. However, the current NNPC leadership has rejected this advice, expressing confidence that the refineries will eventually become operational.
Nigerians now await the outcome of these ongoing efforts and the future trajectory of the three state-owned refineries under the current NNPC leadership.
