Introduction
In recent times, Nigeria’s oil and gas sector has faced a surge of turbulence, with one of the most notable events being the standoff between the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Dangote Refinery. The ongoing dispute, ignited by the termination of approximately 800 workers at the Dangote Petroleum Refinery, has escalated to a point where PENGASSAN issued a directive to halt crude oil and gas supplies to the refinery. This move could destabilize an already fragile Nigerian economy. This standoff, which PENGASSAN claims is in response to the alleged mistreatment of workers, has implications that stretch far beyond the union’s ranks, affecting the broader Nigerian economy.
The Dangote Refinery, a key player in Nigeria’s energy and oil landscape, is one of the largest in the world. With a daily processing capacity of 650,000 barrels, it is poised to address Nigeria’s long-standing dependence on imported petroleum products. Yet, with PENGASSAN’s recent directive threatening the refinery’s operations, it is essential to analyze the broader implications of such actions and consider the urgent need for government intervention. In the face of unions resisting changes, the role of the government becomes more critical than ever to ensure that Nigeria does not jeopardize its economic future for personal or partisan gains.
I. The Current State of Nigeria’s Oil Sector: A Struggling Industry
Nigeria’s oil sector has been facing mounting challenges for years. Despite being Africa’s largest oil producer, the country struggles with inefficiencies and outdated infrastructure, including its oil refineries. Currently, the three government-owned refineries are operating at less than 20% of their capacity, with Dangote’s refinery standing as the last hope for self-sufficiency in fuel production. The situation has become dire, with a high dependence on foreign oil products, resulting in consistent fuel shortages and fluctuating prices.
As part of the Nigerian government’s efforts to overhaul the oil sector, there has been talk of divesting state-controlled refineries to private investors who could manage them more effectively. The privatisation initiative aims to improve efficiency, increase local production, and reduce Nigeria’s reliance on imported petroleum products. However, these plans have faced significant resistance from unions, especially PENGASSAN, which has strongly opposed the idea of reducing the government’s stake in oil assets.
II. PENGASSAN’s Threat to Cut Supply to Dangote Refinery: An Economic Sabotage?
The dispute between PENGASSAN and Dangote Refinery is not merely about worker rights; it also involves broader economic implications for Nigeria. PENGASSAN’s threat to stop the supply of crude oil and gas to Dangote’s refinery, if enforced, could have disastrous consequences for Nigeria’s energy stability. As one of the few remaining large-scale refineries in Nigeria, Dangote’s plant has the potential to alleviate fuel shortages, create employment opportunities, and increase government revenue.
In a statement, Dangote’s management described PENGASSAN’s actions as “criminal” and a form of “economic sabotage.” The union’s directive could lead to fuel scarcity, increased transportation costs, and disruptions in aviation, directly impacting the daily lives of millions of Nigerians. Furthermore, such a move threatens to cripple a facility that is critical not only to Dangote’s commercial success but also to Nigeria’s economic recovery.
The risks posed by this action go beyond the immediate financial loss; they also endanger Nigeria’s image as a destination for foreign investment. If the unions can exert such influence, especially in key sectors like oil and gas, it may deter international investors from considering Nigeria as a viable long-term investment destination. This could have far-reaching effects on the country’s overall economic growth, particularly as Nigeria attempts to recover from the fiscal crisis exacerbated by the COVID-19 pandemic and the global oil price crash.
III. The Role of Government and the Need for Intervention
In the context of the PENGASSAN-Dangote conflict, the Nigerian government must step in and resolve this standoff before it escalates further. The government has a responsibility to protect national assets, prevent industrial actions from crippling essential services, and ensure that economic reforms progress smoothly. Given the importance of Dangote’s refinery to Nigeria’s oil and gas sector, the government must take action to mediate between the unions and the company.
In particular, the government needs to assess the potential risks of allowing unions to dictate the terms of operation for critical national infrastructure. The failure to address this issue effectively may set a dangerous precedent where unions continuously hold the country hostage, stalling progress and undermining national interests. More specifically, the government should ensure that the unions understand the broader economic consequences of their actions, as their current stance could send a dangerous signal to other sectors and investors.
IV. Unions, Privatisation, and the Future of Nigeria’s Refineries
A key underlying point in the PENGASSAN-Dangote dispute is the issue of privatization and deregulation. The unions have opposed the sale of Nigeria’s moribund refineries, arguing that such a move would erode Nigeria’s control over its oil assets. This stance reflects the broader resistance from labour unions to privatization efforts that have been proposed over the years. While unions argue that privatisation would harm workers and lead to job losses, it is essential to recognize the economic reality that the current state of the refineries is unsustainable.
The Nigerian National Petroleum Corporation (NNPC), responsible for managing the country’s refineries, is struggling with inefficiencies that have led to the underutilization of the refineries. At the same time, Nigeria’s reliance on imports for refined petroleum products continues to drain the country’s foreign exchange reserves. As Femi Otedola pointed out, the old business model is crumbling, and the government must adapt to the changing realities of the oil industry.
A shift towards private ownership and management of refineries, such as the Dangote refinery, presents an opportunity to modernize Nigeria’s oil sector and reduce the financial burden on the government. If managed correctly, privatisation could lead to better operational efficiencies, greater accountability, and an increase in domestic production, benefiting both the economy and Nigerian consumers. However, the unions’ resistance to this change is hindering progress.
V. The True Cost of Union Resistance: Economic Implications for Nigeria
The resistance from PENGASSAN and other oil unions presents a unique challenge to Nigeria’s economic recovery. Their actions, if unchecked, could result in significant setbacks for Nigeria’s oil and gas sector, which plays a crucial role in generating revenue for the government. The unions’ clinging to outdated business models that no longer align with today’s economic realities is not only hurting the sector but also denying Nigeria the opportunity to modernize and compete on a global scale.
Nigeria’s oil industry has long been mired in inefficiency, corruption, and outdated practices. The continued government control of the refineries through NNPC, combined with resistance to privatization, creates an environment where economic growth is stifled. Moreover, the unions’ stronghold on the industry and their ability to disrupt operations underscores the need for urgent reforms to ensure that Nigeria’s oil sector remains competitive in the face of global energy transitions.
VI. What Should the Government Do Now?
The Nigerian government must act decisively to resolve the situation with PENGASSAN and prevent further economic damage. First, the government should initiate a dialogue between the unions, Dangote Refinery, and other stakeholders to address the root causes of the dispute and find a mutually beneficial solution. Second, the government should move forward with privatisation efforts for the moribund refineries, ensuring that private investors with the necessary expertise can take over and modernize operations.
Furthermore, the government must send a strong signal that it will not tolerate actions that threaten national economic stability. This includes cracking down on illegal actions by unions and ensuring that they operate within the boundaries of the law. Ultimately, the government should establish a comprehensive strategy to address the long-term challenges facing the oil sector, encompassing the need for modernization, diversification, and sustainability.
Conclusion
The ongoing conflict between PENGASSAN and Dangote Refinery is a microcosm of the broader challenges facing Nigeria’s oil sector. As the country struggles to recover from the economic downturn, unions that resist change, even when it is clearly necessary, pose a significant obstacle to progress. The government must act swiftly to mediate this dispute and implement reforms that will enable the oil sector to thrive in a new era. Only by doing so can Nigeria avoid further stagnation and ensure a brighter economic future for future generations.
The time for intervention is now. Nigeria cannot afford to continue clinging to outdated models that no longer serve its interests. The future of the oil sector, and the broader economy, depends on the government’s willingness to embrace change, resolve conflicts, and modernize the country’s infrastructure for the benefit of all Nigerians.
*Prof. Sarumi is the Chief Strategic Officer, LMS DT Consulting, Faculty, Prowess University, US, and ICLED Business School, and writes from Lagos, Nigeria. He is also a consultant in TVET and indigenous education systems, affiliated with the Global Adaptive Apprenticeship Model (GAAM) research consortium. Tel. 234 803 304 1421, Email: leadershipmgtservice@gmail.com