ECONOMIC EVALUATION OF NIGERIA'S QUEST FOR NEW PETROLEUM REFINERIES

Ojuolape, Adebayo Mohammed (), Ajibola, Abdulazeez (), Agbaje, Busrat Abidemi () and Yusuf, Hammed Agboola ()
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Ojuolape, Adebayo Mohammed: Department of Economics, Postal: University of Ilorin, Ilorin, Nigeria.,, https://fssunilorinedu.org/ijbss/index.php
Ajibola, Abdulazeez: Nigeria Incentive-Based Risk Sharing, Postal: for Agricultural Lending,, https://fssunilorinedu.org/ijbss/index.php
Agbaje, Busrat Abidemi: Department of Economics, Postal: Fountain University, Oshogbo, Nigeria., https://fssunilorinedu.org/ijbss/index.php
Yusuf, Hammed Agboola: Department of Economics, Postal: University of Ilorin, Ilorin, Nigeria.,, https://fssunilorinedu.org/ijbss/index.php

Ilorin Journal of Business and Social Sciences, 2017, vol. 19, issue 1, 248-266

Abstract: Numerous researches have shown that energy consumption has positive relationship with development. It is surprising that Nigeria, one of the largest crude oil producers, is periodically faced with scarcity of petroleum products which threatens its growth and achievement of its development targets. The Nigerian Government seeks to remedy this by building more petroleum refineries to augment the poor state of current refineries which has produced at an average utilization capacity of 24% leading the country to import most of its refined product need. With the international refining industry facing a downturn as a result of overcapacity, tighter fuel specifications and competition from alternative sources. This study analyzes the economic viability of the refinery proposition by using a cost-benefit analysis as a background for further analysis to determine if the country should embark on new petroleum refinery projects. The study shows that building refineries is not economical as the analysis shows that there is no extra advantage gained by refining fuel in Nigeria. A positive net present value (NPV) is not enough rationale for embarking on such capital project considering the country's present subsidized pricing structure. The study further shows the impact of the costly subsidy program and recommends that it should be scrapped.

Keywords: Nigeria; petroleum refining; petroleum subsidy; cost benefit analysis. (search for similar items in EconPapers)
Date: 2017
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