Home > Chemical > How Neglect Of Petrochemical Industry Robs Nigeria Of $30bn Yearly

How Neglect Of Petrochemical Industry Robs Nigeria Of $30bn Yearly

The inability of the Nigerian government to utilise its refineries to full capacity has led to the abysmal deterioration of the petrochemicals industry, making the country to lose over $29.7 billion annually in revenue.

The significance of a vibrant petrochemical industry to an economy with daily crude consumption of about 445,000 barrels still largely dependent on product exports cannot be over emphasised.

For Nigeria, the petrochemicals industry, a sub-sector of the petroleum industry, occupies a key place in the world economy as it produces the crucial raw materials from petroleum, including kerosene, liquefied natural gas (LPG), diesel, ethane, plastic, rubber, yarn and other intermediary goods consumed across the world.

It was little wonder therefore that the country’s failure to harness these resources has left many companies that ordinarily should depend on raw materials from domestic petrochemicals in comatose, while those struggling to survive are doing so at a huge cost in the face of the nation’s dwindling foreign exchange inflow.

That explains why demand for petrochemicals products is driving activities in the end-user segments, which include a well-developed manufacturing sector, that provides a ready market for end-products of the industry.
Status of Nigeria’s petrochemical industry

For Nigeria, the challenge has not been the lack of investment but that even a firm like Indorama Eleme Petrochemical Limited (IEPL) located in Port Harcourt, Rivers State, has remained lone range in Nigeria’s petrochemical industry.

As at 2013, the firm had an annual installed capacity of 300,000 metric tonnes of olefins, 250,000 metric tonnes of polyethylene and 80,000 metric tonnes of polypropylene, which are high value raw materials that could earn the country so much in reserve if exported.

Even the Warri and Kaduna refineries that ought to provide the much-needed leap for the country’s petrochemicals indus-try appear to have failed to pro-duce products that will meet the yearning of their stakeholders.

For instance, at inception, the two refineries were designed to produce Carbon Black and Linear Alkyl Benzene (LAB) used in the manufacture of deter-gents. But this capacity has also been affected by the low crude oil refining capacity in both firms.

Observers have often lamented that despite the country’s large deposits, it still depends on imports of petrochemical products for raw materials for its manufacturing companies. It is estimated that Nigeria utilises less than 40 per cent of capacity utilisation, which results in lower petrochemicals yields, thereby creating a need to augment with imported raw materials.

Petrochemical products, including; olefins (ethylene, propylene, bu-tadiene) and aromatics (benzene, toluene, xylene) are used in end-user markets such as paints, plastics, explosives and fertilizers sub-sectors.

Sector obstacles

Daily Sun learnt that Nigeria’s failure to develop its petrochemical plants is largely the reason manufacturing companies are dependent on imports for over 80 per cent of their raw materials worth over $10 billion (about N2 trillion ) yearly.

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It is also the reason many manufacturers had gone out of businesses, especially during the Central Bank of Nigeria’s (CBN) forex restriction on 41 firms.

In Nigeria and across the world, foam, plastic, paint and textile manufacturing companies depend on derivatives of petrochemicals most of which are imported because the local industry has not received due attention.

Stakeholders react

Commenting on the viability of the petrochemical industry and how it can boost the economy, a don in the Chemical Engineering Department, University of Lagos (UNILAG), Prof. Abiola Kehinde, in a research document entitled,

“Strategy for the Devel-opment of the Petrochemicals Industry in Nigeria,” disclosed that the Nigerian petrochemicals markets (excluding export of crude oil) was worth $14.03 billion in 2008 with forecasts projecting it could hit $29.7 billion by the end of 2015.

Abiola maintained that a restructuring of the operation of Nigerian refineries, with greater private sector participation, was likely to increase the capacity utilisation of the refineries.

‘‘Once this is instituted, the cost structure of the Nigeria’s petrochemicals market would improve as crude oil is the main feedstock for the production of olefins and aromatics in Nigeria,” he wrote.

But, a former Project Manager and Managing Director of the NNPC’s Eleme Petrochemicals Company Limited, Dr. Edet Oahimin-Akhimien, believes that the decision to privatise the firm was a bad business decision taken by the Federal Government and implemented by the Bureau of Public Enterprises (BPE).

He said the decision to privatise a company that was running for close to 10 years was not in the best interest of Nigerians. The complex, according to him, rolled out its first product in August 1995 and was formally commissioned by the then Head of State, General Abdusalami Abubakar (represented by the then Chief of Air Staff) in May 1999, and the privatisation of the company was in 2005/2006.

He regretted however that since the privatisation, the country has continued to import petrochemicals, thus depleting its lean foreign exchange reserves while equally depriving Nigerians of job opportunities.

The claims of Akhimien, was however, punctured by the Managing Director of Idorama Eleme Petrochemicals, Mr. Manish Mundra, who maintained that the buy-over of the company by Indorama has provided a lee-way for local manufacturers by saving them the challenge of sourcing foreign exchange in the face of its contribution to import substitution, that is, producing the raw materials that were hitherto imported into the country.

The company, he said, has immensely contributed to employment generation by employing more than 1, 200 Nigerians from the Niger Delta region and other parts of Nigeria.

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‘He said: ‘I must tell you that through our exports, we have also put Nigeria on the petrochemicals map of the world and earned foreign ex-change for the country. We have contributed significantly to the industrial development and economic growth of Nigeria.

“We have created massive wealth and employment opportunities (direct and in-direct) for many Nigerian people. And very importantly too, we have been expanding our operations in Nigeria: In 2012, we built and com-missioned a new PET plant, the only one in sub-Saharan Africa.

We also commenced construction of a new fertilizer plant in 2013; the plant is now ready for commissioning, alongside two other complementary projects – an 84-kilometre gas pipeline and a port terminal at Onne Port in Port Harcourt. These three projects were all completed on schedule.”

He explained that as part of efforts to boost the economy, Indorama Corporation has invested about $3.5 billion in Nigeria since it became the core investor in Eleme Petrochemicals in 2006.

‘‘I have mentioned some of our various projects. In the near future, we will also be investing in methanol and NGL plants. And by 2019, we would have invested a total of $4.7 billion to realise our vision of building the largest petrochemicals hub of Africa in Nigeria,” he said.

Meanwhile, most companies in the plastics, automobiles, bottling, beverages, paints, pharmaceuticals, foam, and allied industries in Nigeria have, in the past eight years, sourced almost all their raw materials for products or packaging from Indorama Eleme Petrochemicals.

This can be confirmed from such companies and the Raw Materials Research & Development Council of Nigeria.

“Our marketing policies and practices have been designed to meet the needs of the Nigerian market with warehouses in Lagos, Kano, Port Harcourt,’’ he insisted.

But despite the claims by Indorama to have provided the needed boost for the country’s petrochemicals industry, the Nigerian Society of Chemical Engineers (NSChE) had recently raised the alarm that the N20 billion ($100 million) annual investments in Nigeria’s oil and gas process chemical industry is in recession.

The group maintained that the depression in the processed chemical industry was caused by the grounding into a total halt of the four refineries in Nigeria.

Former President of the NSChE, Dr. John Erinne, however, called on government to save revenues loss from refineries by speeding up its privatisation programmes.

Erinne, who gave an over-view of the oil and gas treatment chemical in Nigeria, disclosed that a surge of estimated investments worth $7 million to $10 million per annum could be secured if the refineries are working optimally.



Source: The Sun

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