Modular refineries in Nigeria are facing a critical challenge due to the ongoing forex crisis, which threatens to halt their operations.
These refineries, licensed to refine crude oil, are struggling to access foreign currency to purchase the necessary raw materials. This inability is putting their viability at risk, potentially leading to shutdowns.
Eche Idoko, the Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), highlighted the severity of the situation, stating, “The purchase of crude oil in dollars is currently the major challenge to modular refineries.”
Difficulty Accessing Forex Impacts Modular Refineries
He emphasized the impact of purchasing crude in dollars while selling refined products in naira, creating a financial strain exacerbated by the scarcity of foreign currency.
Operators of modular refineries expressed concerns over the Federal Government’s failure to provide promised feedstock and support. Idoko warned that without intervention, these refineries might be forced to cease operations, exacerbating the country’s dependency on imported petroleum products.
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Operational Constraints Due to Forex Crisis
The forex crisis is significantly hindering the production capacity of modular refineries in Nigeria. Operators lamented the scarcity of dollars, making it difficult to procure crude oil, a crucial component of their operations. With the country’s reliance on imported petroleum products, the inability to refine crude domestically exacerbates economic challenges.
Idoko emphasized the impact on production levels, stating, “We’ve not been able to get enough crude, and from the little that we see, we’ve not been able to get forex to buy them.” This constraint not only threatens the survival of modular refineries but also exposes Nigeria to the volatility of international markets.
Government Intervention Needed to Sustain Operations During Forex Crisis
Amidst the challenges, stakeholders are calling for government intervention to salvage the situation. Suggestions include selling crude oil to modular refineries in naira, easing pressure on foreign exchange reserves, and stimulating the local refining industry.
While government officials acknowledge the issue, concrete actions to address the forex crisis’s impact on modular refineries remain pending. The Minister of State for Petroleum Resources, Heineken Lokpobiri, affirmed efforts to meet production quotas to support local refiners but admitted existing limitations.
In conclusion, the forex crisis poses a significant threat to the operations of modular refineries in Nigeria. Urgent measures are required to alleviate the burden on operators and sustain domestic refining capacity, ultimately reducing the country’s dependence on imported petroleum products.