POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013

POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013

ABSTRACT

The contradictions of importing over US $10 billion fuel annually for domestic consumption, in the midst of abundant oil endowment, has attracted attention and concern from researchers and investigators. This study, therefore, set out to evaluate the effects of the political economy of fuel importation on the development of refineries in Nigeria between 1999 and 2013. It set as its objectives the task of interrogating the nexus between allocation of fuel import licenses to independent marketers and investors in the development of new refineries in Nigeria; the connections between fuel importation
probes and the challenges hindering the development of new refineries in Nigeria; and the relationship between expatriates’ dominance of fuel importation and distribution, and the integration of Research and Development (R&D) in Nigeria’s petroleum technology development. The study adopted the political economy theoretical framework of analysis. Data were generated through the qualitative descriptive methodology and the ex-postfacto research design. The study highlighted the interplay of class interest and power relations on fuel importation to the neglect of building new refineries, in ways that enriched the dominant class coalitions and their political loyalists in the fuel-import dependent economy. This manifested specifically in the allocation of fuel import licenses to independent marketers through favouritism, prebendalism and clientelism that discouraged investors in the development of new refineries in Nigeria; fuel importation probes that failed to adequately expose the challenges hindering the development of new refineries in Nigeria; and expatriates’ dominance of fuel importation and distribution that undermined the integration of R&D in Nigeria’s Petroleum Technology Development.
The study recommended, among others, that the government should increase R&D funding from the current 0.2% to at least, up to the required UNESCO approved 1% of the Federal Government Gross Domestic Product (GDP). Also, that the Nigerian government, should as a matter of urgency, advance policies that will lead to private sector-led development of the refineries in Nigeria’s downstream oil sector (as in Canada) where the functional refineries are privately owned.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Nigeria is Africa’s largest oil producer and fifth supplier to the United States. She is rated among the 12 biggest oil producers in the Organization of Petroleum Exporting Countries, (OPEC), contributing about 2.5 million barrels per day (bpd) to the OPEC basket. She is the sixth largest oil exporter, “wit h a total of 173 oil blocks in operation, according to the Department of Petroleum Resources (DPR)” (Eboh, 2013:1). The OPEC’s Annual Statistical Bulletin 2012 shows that Nigeria has proven crude oil reserves of 37.2 billion barrels, while proven natural gas reserves stands at 5.154 million cubic metres, making it the eighth in the world gas reserves and first in Africa. Yet the country depends on fuel importation to meet local demands of petroleum products.

POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013