Ayodeji Abdulrauf, Founder and CEO of Thinkstartup Beyond Borders, has provided a comprehensive assessment of Nigeria’s petroleum value chain, shedding light on critical issues ranging from the operational state of the Port Harcourt refinery to challenges with crude oil theft, subsidy removal, and foreign exchange (forex) management.
Abdulrauf made these submissions on Thursday November 28, on TVC’s Politics Today
Petroleum Economics: Local Refiners vs. Importers
Abdulrauf highlighted the financial dynamics in the petroleum sector, stating:
“It is more profitable for an individual to import PMS into the country than buy from a local refiner at this point because of the issue of demand and supply. However, the removal of subsidy and the price differential have reduced these margins drastically.”
He explained that up to 50% of Nigeria’s refined petroleum products previously leaked through porous borders, with smugglers taking advantage of subsidised pricing. Since the subsidy was eliminated, this has been curtailed, forcing importers to adjust strategies as dollar rates and crude pricing squeeze profit margins.
The Role of Naira-for-Crude Policy
Abdulrauf supported the government’s naira-for-crude policy as a means to stabilise the sector. He noted:
“The government has taken the right policy by ensuring that crude oil is sold locally in naira, eliminating the pressure of sourcing dollars. But selling in naira doesn’t mean buying below international rates; it’s about regulating the conversion rate.”
This initiative aims to reduce forex pressures but requires robust oversight to prevent abuse by stakeholders converting naira-bought crude for dollar-denominated resale.
Operational Challenges: Refineries and Energy Security
The resumption of work at the Port Harcourt refinery was a key focus of Abdulrauf’s remarks. He pointed out that while local refining could reduce import dependency, regulatory inefficiencies continue to hinder progress. On energy security, he praised the government’s efforts to curb crude oil theft and bunkering:
“The government has been consistent in increasing crude oil output by addressing theft and sabotage. Protecting pipelines and communities where refineries are located is crucial to sustaining these gains.”
However, Abdulrauf called for reforms in the oil licensing process, urging regulators to ensure transparency and prioritise professionals over intermediaries.
Forex Market and Regulatory Gaps
On the controversial forex market structure, Abdulrauf expressed concern about the lack of uniformity in exchange rates across official, bank, and black-market channels. He said:
“The black market should not exist as part of our forex system. Regulators must act decisively to unify the rates and ensure transparency in allocation.”
He emphasised that speculative activities thrive due to gaps in regulation, undermining the naira’s value and stability.
CNG as an Alternative
Discussing alternative energy, Abdulrauf advocated for expanded adoption of compressed natural gas (CNG) to reduce dependency on PMS. He lamented the slow rollout of infrastructure, saying:
“Every local government in Nigeria should have at least 10 CNG centres. The current distribution is inadequate, discouraging many from converting their vehicles despite rising fuel costs.”
Illegal Oil Activities and Community Engagement
The prevalence of illegal oil activities remains a significant challenge. Abdulrauf stressed that effective regulation and community engagement are vital, noting that:
“Regulators must step up to address the issue of collaboration between local security operatives and oil thieves. Protecting the pipelines must go hand-in-hand with ensuring that host communities benefit from these resources.”
Energy Security
Abdulrauf commended the government’s strides in improving energy security and refining capacity but maintained that success hinges on regulatory reforms, transparency, and robust enforcement mechanisms. He concluded:
“Strong institutions, not powerful individuals, are what will ultimately transform Nigeria’s energy sector.”
