Nigeria's struggle to break the 'oil curse' | FT Film

You can enable subtitles (captions) in the video player

Why Nigeria can't refine its own oil is a question that's been asked for generations.

Two hugely important things have changed, refining and subsidy.

When the fuel subsidy was removed, there was a kind of panic.

We now live on oil, sleep on oil, eat on oil, which is unfortunate.

Because of the theft, it has created a scenario where there has been a stifling of investment in the sector.

Governments should know that we own the oil.

If you want to get money, in fact, in Nigeria, you must struggle before you eat.

Our tech is just beginning to pick up. Over the next few years, we will become a very, very diverse economy.

How much do you have to hustle? You have to hustle hard.

Nigeria has been a big oil producer for decades now. But very little of that oil has been refined. So you have this absurd position where Nigeria pumps oil, sells it abroad, and then reimports it in the refined products that it needs.

The idea, in theory, is that if you have a refinery that operates locally, you would be able to pay in the local naira currency and reduce quite a substantial amount of your dollar exposure.

Regular supply of refined product will definitely go a long way to help our economy. Now we have epileptic supply, queues at petrol stations, many petrol stations running dry.

Given its basic potential to produce roughly 2mn barrels of oil a day, then the first move up the value added chain ought to be through refining oil products.

Oil was recently discovered in the east. Nigerians are developing their industry with their own research methods and their own hands.

Shell and BP found oil in Nigeria in 1956, four years before Nigeria got independence from Britain.

There was huge hope for Nigeria, then a country of 45mn people.

Princess Alexandra handed over control on behalf of the queen.

Now, finally free of the shackles of colonialism, with the bonus of having discovered this great resource that could fuel its own economy, make money that could be spent in Nigeria on Nigerians.

I believe we made a very, very deadly mistake. We put all our eggs in one basket of oil. We even ignored gas. We were flaring gas, which is a very important commodity.

I know many Nigerians who think the worst thing that happened to an independent Nigeria was to discover oil. The currency becomes artificially overvalued, making it very, very difficult to produce and export goods because they're too expensive and making it very attractive to import goods. So all sorts of Nigerian industries got wiped out.

We ignored agriculture, which should have been the centrepiece of our economic development.

The government owns four refineries. But despite billions of dollars in investment over the years, they've just never been able to refine petroleum products.

They've broken down. They've run out of spare parts. At best, they've run massively under capacity.

And when I was president, I invited Shell, and I said, look, come and take equity participation and run our refineries for us. They refused. They said our refineries have not been well maintained.

We have brought amateurs rather than bring professionals. They said there's too much corruption with the way our refinery is run and maintained. And they didn't want to get involved in such a mess.

For years and years and years, there have been pledges that the refineries will be fixed.

How many times have they told us that? And at what price? Those problems, as far as the government refineries are concerned, have never gone. They have even increased. So if you have a problem like that, and that problem is not removed, then you aren't going anywhere.

Our huge investment of over $18.5bn in this industry has been prompted by our desire to support and contribute to the federal government's sustained efforts to transform our economy and properly position our country as a leading nation in Africa.

The Dangote Refinery is a $20bn project that, at its peak, is designed to process 650,000 barrels of crude daily.

Well, it is a game changer. I think this is not hyperbole.

Dangote decided to take on the challenge. So he's building the biggest single-train refinery in the world.

This was a project that was happening in the swamplands. So they had to build their own port to receive manufacturing equipment.

There weren't enough trucks in Nigeria to truck all the equipment. So he had to build his own trucking factory.

With the power shortages in Nigeria, obviously, they couldn't rely on the national grid. So they had to build their own power plant from the ground up.

In Africa, there is no infrastructure. So when we are looking for cranes, we couldn't get cranes to even hire.

He's had to kind of remake his part of the country, at least even to get it off the drawing board.

When you import things into your country, you are importing poverty, exporting jobs out. So we have to stop it.

Aliko's investment in refinery, if it goes well, it should encourage both Nigerians and non-Nigerians to invest in Nigeria.

I think that the biggest impact is perhaps the most subtle one, which is that all of Nigeria's huge entrepreneurial educative energies go into basically an arbitrage play, buying and selling crude and refined products.

And if they turn their attention to something else that is productive, that creates jobs in Nigeria, that pays more taxes in Nigeria, then of course, the Nigerian economy will benefit hugely.

So Aliko Dangote is Nigeria's richest businessman.

Nigeria's foremost industrialist.

He made his fortune on producing simple things.

He is a pioneer in the cement manufacturing industry.

And now he's moved into refining oil. Depending on who you ask, he is the greatest businessman that Africa, certainly that Nigeria, has ever produced. Thousands of jobs depend on him. He's the biggest taxpayer in Nigeria. And he's broken this curse of Nigeria importing everything.

To his detractors, he's a man who's manipulated the government. He's a monopolist. He's rigged the system so that he doesn't have to compete.

When the FT interviewed him last year, he was at pains to say that this was the wrong characterisation, that he is someone who has built his business from the ground up. But I think whatever you think of him he is the most important business person working in Nigeria today.

Dangote thinks the refinery will reach 85 per cent capacity by the end of this year. Most people would tell you that that's very optimistic. In December of 2023, the Dangote Refinery took delivery of its first 6mn barrels of crude and started test producing aviation fuel and diesel.

But it's struggled to get a hold of the crude supplies it needs to ramp up production. And so it has turned to suppliers in far flung places like Brazil and the United States.

Dangote has been at odds with the NNPC, short for the Nigerian National Petroleum Corporation. He says they haven't delivered all the crude they were supposed to. And their stake in the project has now been watered down to 7.2 per cent. He has mused openly about walking away from this $20bn refinery. But we've spoken to people in his camp who say this was just him letting out his frustration and that should not be taken too seriously.

If those who are selling or supplying refined products for Nigeria feel that they will lose the lucrative opportunity, they will also make every effort to get him frustrated.

A lot of people who have been making a very good living based on the kind of pickings from this trade, theoretically, much of that could disappear. So clearly, there's going to be a whole class of people who do not want this to succeed.

You expect them to fight through non-supply of crude, non-purchase of the product. But I think it's all temporary. We'll get there. I knew that there will be a fight. But I didn't know that the mafia in oil, they are stronger than mafia in drugs.

The fuel subsidy is gone.

For years, fuel subsidies have kept fuel prices artificially low. And one of the first acts of this government was to remove the fuel subsidies.

So the day that we heard that the government was removing fuel subsidies, that day, we had a crisis. Riders couldn't get fuel.

Filling stations actually stopped selling fuel. And some increased their prices. So there was a kind of panic.

Since yesterday morning, we have been here.

Chowdeck is an on-demand delivery platform for Africa. We are currently live in eight cities in Nigeria today. As at last week, we do about 20,000 deliveries every day now.

Sometimes I use a bicycle for my work. Sometimes I use a scooter, depending on which one is available to me for the time as well as availability of fuel.

We are now investing heavily in hiring more riders that have bicycles, partnering with e-bike companies, and just ensuring that we have non-fuel-based means of delivering orders for our customers.

If delivery prices are increased too much, it might turn off people that use the service. They might not want to buy. So that means you using the fuel, you're the one that has to spend more.

How long? How long?

We deliver food from restaurants and medicines from pharmacies, groceries from supermarkets. People started like ordering for these things on Chowdeck because it was actually cheaper to transport those things from the market to their house than them entering bus or public transport to go deliver those items.

On a typical day on Chowdeck, I can do 10 orders, sometimes 12. I can make within 8,000 [naira] to 10,000. And I've seen a day when I made like up to 12,000.

There's always questions to fight every time as a business owner. So I think that's the excitement of trying to build a company in Nigeria. I'm not excited about the crises. I hope crises don't happen. But when they happen, it just gives us a chance to be resilient and just solve problems as they come.

Yes. I think that we are at a turning point. Two hugely important things have changed, refining and subsidy.

Fuel subsidies are part of the national psyche in Nigeria. I think people regard them as the only benefit they've gotten from their oil-rich rich country.

But this is also a very expensive policy because it means that, as the oil price goes up internationally, the amount that you have to subsidise petrol also goes up.

The NNPC is a state-owned corporation, although two years ago, they said they are now a private limited corporation.

If you want to do an offshore deal, you need to do business with NNPC. If you want to do an onshore deal, you need to do business with NNPC.

The NNPC is the state agency responsible for paying the fuel subsidies. And that means that oftentimes they don't have enough money left to pay back into the government account.

So you've had this absurd situation that as the oil price spiked, NNPC was literally handing over zero to the Treasury.

Obviously, there's very little money left for revamping its own pipelines or its own infrastructure, which contributes to the inability of the country to meet its Opec targets. But also, in terms of little money left to invest in trying to revamp the refineries as well.

When the fuel subsidies got to a peak of about $10bn in 2022, there was a sense that Nigeria could no longer afford this, especially because it felt like the government was paying these huge sums at the detriment of other sectors, including health and education, that have very poor outcomes in Nigeria.

When Bola Tinubu came in, in his inaugural speech, he said almost offhandedly, subsidy is gone. Fuel prices skyrocketed.

The cost of fuel has obviously driven people into poverty because Nigeria relies on fuel for not just power generation, but also moving goods and services and moving people as well from one part of the country to another.

You and I and I,

It was perfect timing

My name is Aramide. I am a singer, songwriter, and guitarist. I've been doing music for quite a while. It's my happy place.

And we fantasise, I realise.

I sing a lot about love and life. It takes them away from what the real problems are: inflation, no lights. Everything is expensive. Like, it's depressing enough. If you were filling your tank with 20,000 naira before, now you're filling your tank with close to 60,000 naira.

The moment we have been waiting for, Aramide.

How much do you have to hustle? You have to hustle hard. So I think that most people, before they decide to come for an event, they try to prioritise. They're like, OK, do I really have to be there?

Video directors are charging more. Music producers are charging more. Band people are charging more. Like, everything that happens in the economy, it's a ripple effect. It's expensive to promote music. It's expensive to put yourself out there now.

Things seem anxious and uncertain. I understand the hardship you face. I wish there were other ways. But there's not.

You could argue, and I think most economists would argue, that the subsidy was hugely distortionary to the Nigerian economy, distortionary and expensive and really needed to go. But the way it was done was really shock therapy overnight.

What hardship can they cause people? How are you going to ameliorate that? There's a lot of work that needed to be done. Not just wake up one morning and say you remove subsidy.

The purpose of removing fuel subsidy in Nigeria was to allow the free hand of the market to decide how much petrol would cost per litre. But what we're seeing right now is that there's still some government intervention. The cost of petrol should be more than what it currently costs right now.

Because of inflation, the subsidy that we have removed is not gone. It has come back.

Some of the major problems with the discovery of oil in Nigeria have come from host communities in the delta who have often asked what oil has done for them as a community.

A very famous protagonist was Ken Saro-Wiwa, who protested specifically against Shell, and who said we are suffering from pollution. Meanwhile, our kids are not going to school. Our other industries are a wreck. And we want a redress. Unfortunately, this happened under a military government who hanged him.

In the mid-2000s as well we saw a movement called the Movement for the Emancipation of the Niger Delta (MEND) that also began agitating for better conditions for people in the delta. And this led to attacks on oil installations. Oil workers were kidnapped.

Here's my name, my name is high chief Solomon Ndigbara, 'When the chief steps out people run away', of Ogoniland. In our own area, there was no kidnapping. We can vandalise the pipeline, blow up the pipeline. Any government activity, we would obstruct them from doing. My fight was that government should know that we own the oil.

They killed one of our heroes, Ken Saro-Wiwa. And that made me join [the movement]. He said that no, you cannot come to our place and collect oil without giving us a good school and good water. He talked in peace. Nobody listened to him. The next thing they do is to kill him. In my place, until now, the government has not been able to collect our oil.

The reason why we marched today is that we want to let people know there is a plan to collect oil from Ogoni. Those selfish politicians, they want to stay in Abuja, decide the companies that will come to Ogoni and take oil. And we say, no.

This picture you see, is just when I came out from the creek.

So eventually, the government of the day in 2009 reached an amnesty deal that saw a lot of fighters drop their arms in exchange for money and for the government setting up a commission to address the concerns that the agitators were bringing to the table at the time. There are leaders of that movement who are now politicians. One of them last year got a contract to help the Nigerian government prevent attacks on oil installations.

Sometimes they say amnesty is working. No. Some of the people that participated in the struggle never got anything. But when you tell [the people], let us make peace, then tomorrow, they have something doing. They will continue [with] the peace. Nigeria is the type of country where you can pay bribes. If they see God, they go and bribe God.

When I see that the all the things the federal government said they would do for me, they did not do any of them, I decided to open a mill where I do [palm] oil, so that I can train my children and do other things.

See, over here is the palm fruit. That's what I did.

Nigeria politically is a complicated country anyway. You could argue that it was sort of cobbled together under British colonialism. So there's not necessarily this inbuilt sense of national unity.

So if you have nine states where the oil is concentrated, it's quite natural for those states to say, well, hang on. Isn't this ours? And yet, what happens in the Nigerian political economy is basically, the money from oil goes to the federal government now based in Abuja, who then redistribute. Now, some of it goes preferentially back to those nine states. But there's huge dissent.

My name is Fyneface Dumnamene, Fyneface. I work as a human rights defender, and of course, an environmental activist. Where I'm seated now, if you look behind me, you will see massive environmental pollution. The people have been denied of their traditional means of livelihood.

But some time ago in this Bolo community, it was a place that you can see houses very close to the water. You can put your pot on the fire cooking. And you come to the back of your house, you throw your net. And you can catch fish to put in the same pot that is on the fire.

The entire water body is now dead. And there is a need for both local and international attention to be drawn to this so that this place can be cleaned up and the people can have their livelihoods restored.

Multinational oil companies, they are contributing to environmental pollution in the Niger Delta. We also have the role being played by a new generation of polluters, the artisanal crude oil refiners. It's a very big process that employs more people than some state governments in Nigeria.

They vandalise the pipelines and they get the crude oil. And the youths don't believe that they steal the crude oil. They believe that they collect the crude oil because they said it is their God-given resources that is under their soil in their land.

At least the survival of human beings first before environment. Kpo-fire is the local language. But it's where we go to a site and tamper with the pipes, break the pipes and get crude to survive. I have worked with the artisanal refinery for 11 years now. I have more than 60 workers, more than six-seven camps.

I have people that cook for them at the camp. Altogether, I have about eight speedboat drivers. When the product arrives, some cook the product at night. Those ones, they boil it special. Then I have also the section that sells. By the grace of God, that is what I've been doing, because I have no job.

Like, this is the product I'm talking about. You can use it for car or generator. This is about 3,000 naira, $2. dollar. To tell you the truth, sir, it's dangerous. But if you want to get money, in fact, in Nigeria, you must struggle before you eat.

I have had incidents like two or three times, fire incidents. Four people killed, some got injured. Even when there were deaths, [other] people are still rushing to work. Where there is money, there is always danger.

Majority of community people support what they are doing because it makes them to have DPK, which is kerosene. The Nigerian government is unable to produce the kerosene from any of its refineries.

Ask a community member, can you show me an artisanal refinery in this community? They will tell you there's nowhere that it exists in the community. That is because they are benefiting from the activities and it's contributing to the development of the local economy.

And these sites are also owned, allegedly, in partnership and collaboration with politicians, in partnership and collaboration with security operatives that operate in the Niger Delta. They all share according to their investment into the process. So it is an organised crime process.

For years now, Nigeria has not been able to meet its Opec quota. A lot of it is because that oil is stolen.

And you cannot talk of boosting the economy when you are turning a blind eye at the issue of security.

Even if I stop, what about the rest behind me? It is from me they are feeding. Even as a boss, I've been arrested once. My workers, they have arrested them several times. But I know how to get them out. At least through negotiation, they will come out. And the work will keep on flowing on.

Illegal refineries are not a victimless crime. They contribute to existing environmental damages. There's a problem of black soot, which means that the air quality in Port Harcourt is not very good. You can feel the soot literally on your hands.

Yeah, definitely, the work we are doing is dangerous. I have been attacked six times. Just last year, about nine boys came out of the bush and started shooting at me.

In reverse gear.

We have to continue from where our forbearers stopped. Like Ken Saro-Wiwa is from my area. So no matter the threat we face, we continue to speak for us to have a better environment that supports the life of the people.

There are huge problems, reputational, logistical, criminal, and regulatory around these onshore wells. As the big oil majors pull out, local companies who either believe that they can or indeed are more able to negotiate some of these problems are moving in.

Empowering Africa.

My name is Osa Igiehon. I'm the chief executive officer of Heirs Energies Limited, the operator of [oil block] OML 17. We operate about 5 per cent of Nigeria's oil production and roughly about another 5 per cent of Nigeria's gas production into the domestic market.

Whilst we hear the global narrative of energy transition, which talks about moving from predominantly one source of energy to another source of energy, in Nigeria there is a big transition also going on, not about energy sources, but particularly with onshore with IOCs, international oil companies, leaving and being replaced by indigenous oil companies.

It is posited that by the end of the decade most of the international oil companies would no longer be active onshore, and they will now be indigenous oil companies.

We're at 5,000. We need to go to 7,000. We need a few things.

So Africapitalism positions private sector in the lead of making investments to improve lives, making substantial prosperity and, at the same time, creating social wealth. It talks about profits. And it talks about impact.

The country should be in the position to produce 2mn to 2.5mn barrels of oil per day. Today, we are only able to produce somewhere in the range of 1.2mn to 1.5mn barrels of oil per day. There are a number of causative factors, but the biggest is the theft. The second challenge is then the point of investment. Because of the theft, it has created a scenario where there has been a stifling of investment in the sector.

Thirdly, there is a global push for energy transition that has made getting financing for oil and gas more challenging. We took over operational control from the previous operator in July of 2021. We essentially doubled our oil production in the hundred days from 27,000 barrels to 52,000 barrels of oil per day. But we noticed very quickly that whilst we are trying to ramp up production, what was getting to the terminal was declining.

In December of 2021, we only got 3 per cent of our production at the terminal. Today, we now get an average of 85 per cent of our production. So lots of appreciation to the government for these steps and very decisive steps they have taken and sustained to secure the pipeline.

Nigeria is usually the biggest producer in Africa, it produces anywhere from between 1.3mn to 1.5mn barrels of oil a day. It's a member of the Opec+ cartel. And it's one of the top 15 producers of oil globally.

The easiest thing for the government to do is really cream off oil wealth. And that is what it's relied on for decades. And so it has this outsized role in the Nigerian economy, both in terms of the foreign currency that it generates, because that is basically the sum of Nigerian exports, and in terms of the government revenue, oil is really king.

The Nigerian government doesn't collect that much tax. That means that the government focuses lots of its energy on making sure that the oil keeps flowing and the oil keeps pumping.

In terms of GDP, it's not as big as people imagine. There's lots of other stuff going on in Nigeria. It has a very big banking industry, insurance. There's a lot of entrepreneurs. It has a big tech industry.

The question that a vast majority of Nigerians ask themselves is: has the oil wealth being used for the greater good of all of Nigerians? And I think the overwhelming answer would be no. The oil wealth has not trickled down to the most vulnerable in Nigerian society.

Our youth are restive. And they are restive because they have no skill. They have no empowerment. They have no employment. We are all sitting on a keg of gunpowder. And my prayer is that we will do the right thing before it's too late.

Oil has been a blessing to Nigeria. It could have been more of a blessing, yes. And it can be a bigger blessing for the future. Our people, our diversity, our dynamism, our resilience, our capacity to confront challenges and surmount them.

Personally, I feel that oil has been more of a curse than a blessing. You have a natural resource that takes over the national psyche so much that it's kind of led to a lack of imagination.

2mn barrels of oil is not enough to make 200mn people rich. So what you get is you get a scramble.

There must be investor confidence created. You have to go from transactional economy to transformational economy.