The Nigerian energy ecosystem is currently witnessing a tectonic shift that is as much about mechanical reality as it is about political survival. For decades, the four state-owned refineries in Port Harcourt, Warri, and Kaduna have stood as silent, rusting monuments to a defunct era of state-led industrialization. They are the “elephants in the room,” as Jonathan Dowells poignantly described in his seminal piece, “The End of the Importation Era: Why IPMAN’s Pivot to Dangote Refinery is Nigeria’s Economic Turning Point”. Dowells’ assessment was unvarnished and brutal: these assets are relics of the twentieth century trying to survive in an algorithmic age, effectively analogue behemoths in a digital world.
Today, the discourse has taken an even more ironic turn as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), a union that once fought tooth and nail against the sale of these assets, has finally begun to sing the song of privatization. This sudden epiphany, while welcomed by some as a breakthrough in labour-government relations, must be interrogated with the skepticism it deserves. It is a shift that comes perhaps twenty years too late, arriving at a time when the assets in question have transitioned from being “fixable” to being functionally obsolete.
To understand the gravity of the current moment, one must revisit the historical betrayal of 2007, a year that marks the greatest “what if” in the history of the Nigerian downstream sector. As President Olusegun Obasanjo prepared to leave office, he recognized the inherent inability of the Nigerian National Petroleum Corporation (NNPC) to manage complex refining infrastructure. His administration successfully negotiated the sale of a fifty-one percent stake in the Port Harcourt and Kaduna refineries to the Bluestar consortium, led by Aliko Dangote and Femi Otedola, for a combined sum of approximately seven hundred and fifty million dollars. This was not merely a financial transaction; it was a strategic transfer of risk and responsibility from a bloated state bureaucracy to the private sector. However, this progress was short-lived. Upon assuming office, the late President Umaru Musa Yar’Adua was pressured by a powerful coalition of labour unions, including PENGASSAN and the NUPENG, alongside what many describe as “NNPC cabals” who benefited from the lucrative business of refinery maintenance contracts and fuel importation. Yielding to this pressure, Yar’Adua reversed the sale, refunded the consortium’s money, and handed the keys back to the NNPC under the assurance that the state could, and would, make the refineries work.
The consequences of that reversal have been catastrophic for the Nigerian economy. In the two decades since that decision, the Nigerian state has poured an estimated twenty-five billion dollars into what is euphemistically called Turn Around Maintenance (TAM). To put that figure in perspective, the state-of-the-art Dangote Refinery, a world-class facility with a capacity of six hundred and fifty thousand barrels per day, was built for roughly twenty billion dollars.
While the private sector built a brand-new empire for twenty billion, the Nigerian state spent twenty-five billion and achieved a net result of zero liters of refined product from its own facilities. This is the “black hole” Dowells warned about, a capital-intensive exercise in nostalgia where billions of naira are sunk into rehabilitation projects that are not investments but sunk costs. The tragedy is compounded by the fact that throughout this period of inactivity, the government continued to pay billions in salaries to thousands of staff at these moribund plants. Data reveals that between 2021 and 2024 alone, the NNPC spent approximately two hundred and seventy-two billion naira on personnel costs for refineries that were not refining a single drop of fuel. We have essentially been running the world’s most expensive welfare program under the guise of an oil company.
The Mechanical Mirage and the Steam Engine Trap
The primary reason why the current calls for privatization might be an exercise in futility is the sheer technical decay of the assets. As Dowells brilliantly noted, we are effectively trying to repair a steam engine with parts from a Tesla factory. The refineries in Port Harcourt, Warri, and Kaduna were constructed in the 1960s, 70s, and 80s using technology that is now three generations behind. In the world of chemical engineering and petroleum refining, technology does not just age; it becomes unsupported. Many of the original equipment manufacturers (OEMs) for the specific pumps, valves, and catalytic cracking units used in these refineries have either gone out of business or have long since stopped producing spare parts for such ancient models. When a critical component fails in the Port Harcourt refinery today, you cannot simply order a replacement from a catalog. Often, parts must be custom-fabricated at an astronomical cost or scavenged from other dead plants, leading to a “Frankenstein” approach to maintenance that can never achieve the operational stability required for a modern refinery.
Furthermore, the scale of these refineries is no longer economically competitive. During his presidency, Obasanjo sought the help of Shell to manage these facilities, only to be met with a firm refusal based on four sobering reasons. First, the refineries were too small, with capacities ranging from sixty thousand to one hundred and twenty-five thousand barrels per day, whereas the global industry standard for profitability has moved toward facilities processing at least two hundred and fifty thousand barrels per day. Second, the maintenance culture was non-existent. Third, the downstream margins were too thin compared to the lucrative upstream sector. Fourth, and perhaps most tellingly, the level of corruption surrounding the refineries was so systemic that a global major like Shell did not want to risk its reputation by being associated with the mess. These problems have not disappeared; they have metastasized. To think that a private investor would today look at a forty-year-old, small-scale, dilapidated refinery and see a “golden opportunity” is to ignore the reality of global energy markets.
The shift in PENGASSAN’s stance, from militant opposition to a proposal for a fifty-one percent private and forty-nine percent government ownership model, is less an epiphany and more a realization of impending irrelevance. For years, the unions used the “national security” argument to protect the status quo, claiming that selling the refineries would leave Nigeria at the mercy of private monopolies and lead to massive job losses. However, the emergence of the Dangote Refinery has shattered that narrative. For the first time, Nigeria has a private-sector alternative that is actually producing fuel, making the state’s failure even more glaring. PENGASSAN’s new preference for the “NLNG model” is a desperate attempt to find a middle ground where they can still protect their members’ jobs while admitting that the current model is broken. But the NLNG model worked because the government was a minority partner in a brand-new, world-class venture from the start. Applying that model to a group of rusted, non-functional assets is like asking a world-class pilot to fly a plane that has been sitting in a junkyard for thirty years, provided the government still owns the tail fin. No serious investor would accept a forty-nine percent government stake in an asset that requires a total teardown and rebuild, especially given the history of political interference in Nigeria’s energy sector.
The Fiscal Irresponsibility of Redundant Labour
One of the most sensitive yet critical issues to interrogate is the labour force. Jonathan Dowells rightly characterized the continued payment of salaries to an idle workforce as an economic aberration. In any other sector, a business that produces zero revenue for a decade would have been liquidated years ago. Yet, the NNPC and its subsidiaries has maintained a full complement of staff, including management and senior-level officials, at all three refinery sites. In 2020, even as the refineries sat silent, the NNPC reportedly employed over fifteen hundred new staff members. The financial implications are staggering. For example, at the Kaduna refinery, which has been a major drain on resources, personnel costs alone amounted to twenty-six billion naira in a single year where zero revenue was generated. This is not just a waste of money; it is a waste of human capital. Thousands of skilled engineers and technicians have spent the prime of their careers doing nothing, their skills stagnating as the world moves toward green energy and advanced refining technologies.
The unions’ fear of “job losses” has historically been the primary roadblock to privatization. However, they fail to see that by clinging to a dying asset, they have guaranteed the eventual extinction of those very jobs. Had the refineries been privatized in 2007, those workers would likely be part of a thriving, modernized industry today, having updated their skills to match the Bluestar consortium’s requirements. Instead, they are now “redundant” in the truest sense of the word. Any private investor taking over these sites today would likely view them as “brownfield” locations—valuable for the land, the pipelines, and the proximity to the coast, but essentially useless for the actual refining equipment. The most realistic path forward is not a “rehabilitation” but a “liquidation and repurposing.” We must stop the charade of Turn Around Maintenance and admit that these sites are now better suited for modular refineries or storage depots than for the large-scale refining they were built for half a century ago.
The broader economic impact of this twenty-year delay cannot be overstated. By failing to privatize and maintain its refineries, Nigeria became entirely dependent on fuel imports, which has put immense pressure on the naira. The “Naira-for-Crude” deals and the constant scramble for foreign exchange to pay for petrol imports are direct results of the 2007 reversal. We have spent trillions of naira on subsidies to keep the price of imported fuel affordable, money that could have been invested in education, healthcare, and infrastructure. The “cabal” that PENGASSAN once accused the private sector of being is, in fact, the group of importers and contractors who have milked the state-owned refineries dry for decades. Every failed TAM contract was a win for someone, and every liter of fuel imported was a loss for the Nigerian taxpayer.
The Path Forward: Scrapping the Ghost in the Machine
Now that the unions are finally “singing” privatization, the government must resist the temptation to follow the flawed NLNG model for these specific assets. The time for partnerships is over; the time for total divestment is here. The state refineries should be sold “as is” to the highest bidder, with no government interference and no guaranteed job protections that would scare away capital. If an investor wants to scrap the entire facility and build a modern modular plant, they should be allowed to do so. If they want to turn the Port Harcourt refinery into a massive blending plant or a regional distribution hub, that is their prerogative. The government’s role should strictly be that of a regulator, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), ensuring environmental standards and fair competition.
We must also confront the reality of the global energy transition. The world is moving away from fossil fuels, and the window for making massive profits from traditional crude oil refining is slowly closing. By the time the government finishes another round of “high-grading” or “repurposing” these refineries, the world might have moved even further toward electric vehicles and renewable energy. Every day we spend trying to revive these “analogue behemoths” is a day we lose in preparing our economy for a post-oil future. The Dangote Refinery has given Nigeria a lifeline, a chance to stop the fiscal bleeding of fuel imports, but it should not be an excuse to keep the state refineries on life support.
The current situation with PENGASSAN accepting privatization is not a cause for celebration but a somber reminder of a lost generation of economic growth. As I have so eloquently put it, we cannot move forward into an era of self-sufficiency while carrying the dead weight of the past. The state refineries are a monument to what happens when sentiment, corruption, and union pressure override economic logic. The billions spent are gone; the technology is obsolete; the opportunity cost is immeasurable. The bold, necessary step now is to stop the pretense. Sell them, scrap them, or repurpose them, but do it now. Nigeria must finally exorcise the “ghost in the machine” and embrace a future where energy security is driven by efficiency and private capital, not by nostalgia and the “futile, capital-intensive” pursuit of a bygone era. We must choose to be the Tesla factory, not the steam engine.
*Prof. Sarumi, a digital transformation expert, writes from Lagos