Get Informed, Stay Inspired

Analysts from Nigeria are doubtful about the recent oil refinery agreements made with Saudi Arabia.
Africa Economy Middle East

Analysts from Nigeria are doubtful about the recent oil refinery agreements made with Saudi Arabia.

Nigerian professionals are optimistic that the recent agreements made with Saudi Arabia will enhance domestic oil production and contribute to economic growth. The agreements involve a commitment from Saudi authorities to repair Nigeria’s four non-functional oil refineries, which have been out of operation for several years, resulting in the country having to import all of its fuel as the second-largest oil producer in Africa.

Last week, during the first Saudi-Africa summit in Riyadh, Nigerian authorities and their Saudi Arabian counterparts reached agreements.

President Bola Tinubu had a meeting with Saudi Crown Prince Mohammed Bin Salman in hopes of attracting investors and improving Nigeria’s struggling economy.

Saudi authorities made a commitment to repair Nigeria’s four refineries, which are situated in Rivers, Delta, and Kaduna states. These refineries have not been in operation for several years, resulting in the country being dependent on imported fuel despite having a daily production capacity of over one million barrels of crude oil.

According to a government official who spoke to journalists after reaching an agreement last week, repairing the refineries is estimated to take approximately two years.

The government of Saudi Arabia has promised to contribute large amounts of foreign currency to help improve Nigeria’s declining reserves, which were made worse by the government’s decision to float the national currency in June in an attempt to unify the exchange rate.

Faith Nwadishi, the executive director of the Center for Transparency Advocacy in Abuja, welcomes the Saudi deal.

According to Nwadishi, Saudi Arabia’s successful refineries and abundant natural resources can assist Nigeria in meeting its production goals and resolving conflicts related to subsidies and the lack of operation in Nigeria’s four refineries.

After assuming the presidency in May, President Tinubu initiated daring economic changes such as eliminating the costly fuel subsidy, with the goal of reducing debt and drawing in additional investments.

Since that time, fuel costs have significantly increased, emphasizing the importance of producing fuel domestically.

FILE - A man buys black market fuel in Lagos, Nigeria, May 30, 2023. President Bola Tinubu has scrapped a decadeslong government-funded subsidy, leading to long lines at fuel stations as drivers scrambled to stock up before costs rise.

In Lagos, Nigeria on May 30, 2023, a man purchases fuel from the black market. President Bola Tinubu has eliminated a government-funded subsidy that has been in place for many years, causing lengthy queues at gas stations as drivers rush to fill up their tanks before prices increase.

According to Nwadishi, the government should proceed with caution and make the Saudi agreement transparent to the public.

“What are the conditions? Is the government open to sharing these conditions with Nigerians so that we can thoroughly examine and evaluate them? What exactly are we granting? Will Saudi Arabia take full control of our refineries or will they provide technical support? Currently, the details of the conditions are unclear,” she stated.

Emmanuel Afimia, the creator of Enermics, a consulting company focused on oil and gas in Lagos, has doubts about the deal’s potential for success.

The current government is demonstrating a satisfactory amount of determination to achieve goals. I would prefer to wait for the specific technicalities of this agreement to be revealed, but from my perspective, I do not believe it will be feasible.

If the refineries were operational, Nigeria could produce approximately 450,000 barrels of fuel per day from crude oil.

Nigerian authorities have announced that they will complete the arrangements of the agreement with Saudi Arabia within six months. There is a lot of interest in whether the conditions will be advantageous for Nigeria.