By Oyewole O. Sarumi, PhD
For over five decades, I have participated in and observed the evolution of Nigeria’s oil and gas industry, from the euphoria of the 1970s oil boom to the quiet tragedy of our national refineries.
I have witnessed policy decisions made and unmade, deals struck and reversed, and billions of dollars sink into facilities that have stubbornly refused to deliver on their promise. So when former President Olusegun Obasanjo, now an elder statesman watching from his hilltop in Abeokuta, declares that Nigeria’s three refineries will never work, I listen not with surprise but with the weary recognition of a man who has seen this movie play out too many times.
His assertions, made during a recent television interview, demand rigorous examination, not because they are new, but because they converge on a single, searing question that has haunted Nigeria for nearly two decades:
When will a sitting president finally summon the political will to do what is necessary, whether that means scrapping these facilities, converting them to modular operations, or executing a fundamental structural transformation? This article dissects Obasanjo’s claims, places them against verifiable facts and global best practices, and offers a clear-eyed assessment of what leadership must now embrace.
Fact-Checking the Claims: The N2 Billion Monthly Wage Bill and the Dangote Reversal
Obasanjo’s assertion that the three moribund refineries are staffed with workers collecting over N2 billion monthly merits careful scrutiny. While precise, publicly audited payroll figures for the specific refinery workforce remain difficult to isolate, NNPC Limited does not disaggregate refinery staff costs in its published financial statements, available data on NNPC salary structures makes the claim entirely plausible. Entry-level staff at NNPC earn between N150,000 and N350,000 monthly, while senior managers and technical specialists command salaries ranging from N500,000 to N5,000,000 per month .
If one conservatively estimates a combined refinery workforce of between 2,000 and 3,000 personnel across Port Harcourt, Warri, and Kaduna, the arithmetic quickly approaches and even surpasses N2 billion monthly when allowances, benefits, and contractor fees are included.
This is not idle speculation; it is the mathematics of a system designed to sustain employment regardless of productivity. Nigeria is paying full salaries to maintain facilities that, by the NNPC’s own admission, operated at utilization rates hovering between 50 and 55 percent even when briefly reopened in 2024 before being shut down again .
The more explosive revelation, however, concerns the Dangote consortium deal. Obasanjo recounted that during his administration, Aliko Dangote offered $750 million for a 51 percent stake in two of the three refineries, specifically Port Harcourt and Kaduna, and that the money was actually paid.
Following the transition to the Yar’Adua government, NNPC leadership and oil sector cabals mounted intense pressure on the new president, who subsequently reversed the sale and returned the funds. Vanguard newspaper’s investigation corroborates this account, confirming that Blue Star, the Dangote-led consortium, paid $670 million for the two refineries and proceeded believing the transaction was concluded, only for the Yar’Adua government to capitulate to labour unions and vested interests who branded the refineries “national patrimony” that could not be sold . At the time of that sale, both refineries were already producing at less than 20 percent of installed capacity with no credible path to improvement.
The reversal was not a technocratic decision; it was a political surrender to interests that benefited from the status quo of dysfunction. Dangote took his refund, nursed his wounds, and six years later announced plans for a private refinery that now stands as Africa’s largest, a 650,000 barrels-per-day facility built with approximately $20 billion, a figure that looms over the $16 billion Obasanjo claims has been sunk into the state refineries without result .
The Anatomy of Failure: Why Shell Said No and What Global Majors Understood
When Obasanjo described Shell’s rejection of his overtures to take equity in and operate the refineries, he was not telling a story of African incapacity; he was revealing the hard-nosed calculus of global energy companies. The Shell executive he summoned for a private conversation offered four devastating reasons for the refusal: upstream operations, not downstream, generate the bulk of Shell’s profits; Nigeria’s refineries at 60,000 and 100,000 barrels per day were far too small when global competitive scale was 250,000 to 300,000 barrels daily; the facilities suffered from poor maintenance and amateur servicing; and the level of corruption surrounding refinery operations was something Shell wanted no association with .
These words, spoken nearly two decades ago, remain as relevant today as they were then. They also explain why global players like Saudi Aramco, Petrobras, and Sinopec have pursued vastly different trajectories, trajectories that offer Nigeria a mirror in which to examine its own failures.
Consider Saudi Aramco. The Saudi national oil company operates refineries both domestically and internationally, but it does so at massive scale and with integrated value chains. Aramco’s domestic refining capacity exceeds 3 million barrels per day, with individual facilities like the Ras Tanura refinery processing 550,000 barrels daily, five times the capacity of Nigeria’s largest single refinery. Critically, Aramco’s model integrates refining with petrochemical production, capturing value across the entire hydrocarbon chain rather than simply producing fuel.
The company also partners selectively with international majors like TotalEnergies and Sinopec, leveraging external expertise while maintaining strategic control. This is not national pride driving irrational decisions; it is commercial logic executed with discipline. Nigeria’s refineries, by contrast, are standalone facilities with negligible petrochemical integration, aging technology rooted in 1960s design, and a maintenance philosophy Obasanjo’s Shell contact accurately described as reliant on “quacks and amateurs.”
Petrobras, Brazil’s state-controlled oil giant, offers another instructive parallel. In the early 2000s, Petrobras faced infrastructure challenges not dissimilar to Nigeria’s, but its response diverged dramatically. The company embarked on deepwater exploration that transformed Brazil into a major producer while simultaneously investing in modern refining capacity scaled to domestic and regional demand. Crucially, Petrobras did not preserve obsolete facilities for sentimental or political reasons.
When assets became uncompetitive, they were divested, repurposed, or scrapped. The company also weathered a massive corruption scandal, the Lava Jato investigation, and emerged with governance reforms that, however imperfect, represented a genuine attempt to break from past practices. Nigeria has had no equivalent reckoning.
Sinopec, the Chinese state-owned behemoth, rounds out the comparison. Sinopec operates the world’s largest refining capacity, over 300 million tonnes annually, across refineries that average above 200,000 barrels per day individual capacity. The company invests relentlessly in technology, maintaining refining margins that keep operations viable even during crude price volatility. It also benefits from a national policy framework that treats energy security as strategic, not rhetorical. China does not keep failed refineries open to preserve jobs; it modernizes, consolidates, or closes them, redirecting workers through retraining and redeployment programs. The message from all three comparators is unambiguous: successful national oil companies run refineries as businesses, not as employment schemes.
The Economics of Waste: Monumental Losses and the Courage of Candour
The current NNPC Group Chief Executive Officer, Bayo Ojulari, has done something rare and commendable in Nigerian public life: he has told the unvarnished truth. Speaking at the Nigeria International Energy Summit in February 2026, Ojulari admitted that the refineries were operating at what he termed a “monumental loss,” adding candidly that “we were just wasting money” . He revealed that crude oil cargoes were being fed into the refineries monthly, yet utilization hovered around 50 to 55 percent, resulting in severe value erosion. The Port Harcourt refinery, he disclosed, was producing only mid-grade products whose aggregated value fell significantly short of the crude input cost, a textbook case of value destruction. His management’s first major act was to shut down the facilities to stop the hemorrhaging.
This admission validates what many in the industry have known for years but dared not articulate publicly: Nigeria’s state refineries are not underperforming assets awaiting a turnaround; they are economic sinkholes that consume public resources without realistic prospect of commercial viability. Between 2015 and 2023, successive Nigerian administrations approved multiple rehabilitation contracts worth billions of dollars.
The Port Harcourt refinery alone reportedly consumed $1.5 billion in a rehabilitation program that yielded no sustainable improvement . Nigeria’s House of Representatives launched investigations that uncovered allegations of fraud, mismanagement, and misappropriation during these rehabilitation exercises.
The pattern is consistent and chronic: significant public funds are allocated, contracts are awarded, work is supposedly done, and the refineries remain unable to process crude at commercially viable rates. This is not a technical problem; it is a governance pathology.
Obasanjo’s reported figure of $16 billion spent on the refineries, just $4 billion short of what Dangote deployed to build an entirely new, world-scale facility, forces an uncomfortable comparison.
For roughly 80 percent of the cost of a brand-new 650,000 bpd refinery built to international standards with modern technology and integrated petrochemical production, Nigeria has achieved precisely zero barrels per day of reliable domestic output from its state-owned facilities. This is not merely inefficiency; it is a national betrayal of staggering proportions.
The economic opportunity cost extends far beyond the direct expenditure. Every naira spent on these failed refineries represents funds not invested in education, healthcare, infrastructure, or genuine energy transition initiatives. Every year of refinery dysfunction represents foreign exchange drained through fuel imports that should have been unnecessary for Africa’s largest crude oil producer.
The Political Will Deficit: Why Presidents Fail to Act
If the diagnosis is so clear and the cure so obvious, why has no president summoned the political courage to definitively resolve the refinery question? The answer lies in the political economy of Nigeria’s oil sector, a complex ecosystem of vested interests, patronage networks, and institutional resistance that has proven remarkably resilient across administrations of different partisan hues. When President Yar’Adua reversed the sale to Dangote, he told Obasanjo he did so because of “pressure” .
That pressure emanated from the NNPC itself, which apparently convinced him that the deal should not proceed. The refineries were branded as national patrimony, sacred assets that must remain under sovereign control. This framing, however emotionally resonant, obscured a more venal reality: the refineries as non-producing entities were more valuable to certain interests than functioning refineries under private management could ever be. Procurement contracts, maintenance agreements, employment patronage, and the opacity of a loss-making system provided opportunities that a profitable, transparent, privately-operated refinery would eliminate.
Labour unions have consistently opposed privatization or sale of the refineries, framing their position as defense of workers’ interests. Yet the workers they ostensibly protect are being paid to maintain facilities that produce nothing of value, a form of disguised unemployment that benefits no one long-term. The genuine objective of employment protection would be better served through a structured transition program that retrains workers for productive roles elsewhere in the energy sector or broader economy, funded by a fraction of the savings from halting the perpetual refinery bailouts.
The NNPC itself, even under the Petroleum Industry Act reforms that recast it as a limited company, has been ambivalent about reform. The same institution that scuttled the Obasanjo-Dangote deal has spent the intervening years proposing and abandoning multiple rehabilitation strategies, initially focusing on the now-discredited contractor-led turnaround maintenance model that focused heavily on raising capital and awarding engineering, procurement, and construction contracts while neglecting day-to-day operational expertise .
Under Ojulari, a genuine shift appears to be underway, the company now says it seeks equity partners who will co-own and operate the assets, ensuring what he calls “skin in the game.” But this approach too will fail if the political system ultimately refuses to accept the loss of control that genuine partnership entails.
The Ojulari Mandate: A Window of Candour and Opportunity
For the first time in NNPC’s history, a sitting Group Chief Executive Officer has publicly acknowledged what his predecessors either denied or obscured. Ojulari’s honesty represents a precious and perishable political commodity. He has stated clearly that the contractor-led rehabilitation model has failed and that what the refineries need is not more money for turnaround maintenance but operational partners capable of running them as commercial businesses for the next 30 to 40 years .
He has disclosed that discussions with potential investors are underway, including foreign petrochemical and refining firms, and that NNPC is prepared to divest significant equity to secure viable arrangements.
This is a welcome departure, but honesty alone will not suffice. Ojulari must now translate his candour into concrete proposals that reach the President’s desk with unambiguous recommendations. His mandate, and his legacy, will be defined not by diagnosis but by action. What specific steps should he be bold enough to recommend?
First, a full, independent, and public technical and financial audit of all three refineries must be conducted by internationally recognized refinery assessment experts. Nigerians deserve to know the precise condition of each unit, the realistic cost of bringing each to competitive commercial operation, and the expected commercial returns under various scenarios. Second, based on that audit, a recommendation must be made for each refinery individually, not as a political package but as distinct assets with distinct prospects.
The Port Harcourt facilities, with access to crude from the Niger Delta, may merit different treatment from the Kaduna refinery, which relies on pipeline infrastructure that has been chronically insecure and sporadically functional. Third, if sale or equity partnership proves genuinely infeasible due to the condition of the assets, modular conversion or outright scrapping must be placed candidly before the President as the fiscally responsible option.
Modular refineries, smaller, skid-mounted units that process 1,000 to 30,000 barrels per day, have emerged globally as a viable pathway for countries with distributed crude resources and localized demand. Nigeria already has a licensing framework for modular refineries, and the Department of Petroleum Resources has granted numerous permits in recent years.
Repurposing the sites of existing refineries as locations for clustered modular operations could preserve some employment while significantly reducing the capital exposure and operational complexity that have defeated larger plants. This is not an ideal solution, modern large-scale refineries will always outperform modular units on efficiency, but it may represent a pragmatic middle ground between the status quo and total closure.
Global Lessons: What Works and What Nigeria Must Abandon
Across the world, nations have faced decisions about obsolete refining assets and reached conclusions that Nigeria seems unable or unwilling to embrace. Japan, in the 2000s, undertook a significant rationalization of its refining sector, reducing the number of refineries from over 30 to fewer than 20 through closures and mergers, driven by declining domestic demand and international competition. The government supported affected workers through retraining and redeployment programs funded by the cost savings from consolidation.
Australia closed several aging refineries in the 2010s, converting sites into fuel import and storage terminals while maintaining a smaller, modernized domestic capacity. In both cases, the decisions were politically difficult but economically incontestable. Workers transitioned to new roles, local economies adjusted, and the national energy supply became more secure and affordable as a result.
What these examples share is a willingness to subordinate the short-term political pain of reform to the long-term economic benefit of sustainability. Nigeria’s governance culture, by contrast, consistently prioritizes the avoidance of immediate political costs over the realization of deferred economic gains. The workers at the refineries, and the communities around them, are not served by a system that pays them to preside over industrial decay. A properly structured transition, funded by the billions that would otherwise be wasted on futile rehabilitation, could provide severance packages, skills retraining, and support for local economic diversification.
The claim that Nigeria cannot afford to close the refineries because of employment implications has the analysis exactly backward: Nigeria cannot afford the far greater cost of perpetuating economically destructive employment practices that drain resources from productive investment elsewhere in the economy.
The President’s Choice and Nigeria’s Future
As I end this piece, let it be known that the refinery question is, in its essence, a test of leadership. It asks whether a president will prioritize the long-term welfare of 200 million Nigerians over the immediate demands of a few thousand workers and the entrenched interests that benefit from opacity and dysfunction. President Bola Ahmed Tinubu, a leader who has spoken of difficult decisions and economic reform as necessary medicine, faces in the refineries a case study of everything his administration claims to oppose: wasteful expenditure, institutional resistance to change, and the sacrifice of national interest on the altar of political convenience.
The path forward requires clarity of purpose. The refineries must be subjected to rigorous, independent assessment without political interference. Options must be presented to the Nigerian people transparently: sale, equity partnership, modular conversion, or closure.
The recommendation must be driven by commercial and technical viability, not by sentiment or interest-group pressure. If the assessment concludes that the refineries are beyond salvage, the President must have the courage to accept that judgment and act upon it—reshaping the sites, retraining the workers, and redeploying the saved resources to productive national priorities.
Obasanjo’s prophecy that the refineries will never work is not an expression of clairvoyance but of pattern recognition. He has seen the governance system that produced and perpetuated refinery dysfunction, and he understands that unless that system itself is confronted, no amount of spending and no number of rehabilitation contracts will change the outcome. The question he has posed to his successors is simple, and it awaits an answer: Who among you will have the political will to do what must be done? Nigeria cannot afford another decade of waiting to find out.
Prof. Sarumi, a digital transformation architect and leadership strategist with over 40 years of cross-sector experience across the African continent, write from Lagos