Nigeria faces an imminent recession thanks to the impact of crashing oil prices and the Coronavirus pandemic but modular refining presents early opportunities for Africa’s most populous nation to restart the engine of its ailing economy.

The modular refinery, unlike the conventional, is not very complicated. It produces two or three products, and a bottom product, which can be recycled for more. It is distillation to get basic products. Modular refineries can be assembled faster, but an enabling investment environment is needed.

Local refining of crude oil for oil-producing countries improves economic performance, provides job for a large number of people reduces capital flight and builds a new set of industries, especially petrochemicals. Modular refineries may not have the scale of conventional refineries but offer some quick wins.

Given this refining potential, Nigeria can take advantage of falling oil prices by boosting local refining. Falling oil prices provide a favourable environment for modular refineries to thrive. “The lower all prices are the better for modular refinery because it takes just bit of crude oil,” Auwalu said. Local refining will reduce the burden on foreign reserves and foreign exchange.

The cost of producing a barrel of oil in Nigeria is as high as $38. This means oil companies operating in Nigeria face enormous headwinds at $28 per barrel of Brent crude in the international market. This is two times less than Nigeria’s initial budget benchmark of $57 per barrel and $2 less than the recent $30 reduction to reflect the reality of falling oil prices. This supports a strong case for local refining.

Although OPEC+ leaders Saudi Arabia and Russia arrived at a historic crude production cut on April 9, effectively halting a bitter oil war which saw prices implode by more than 50 percent from January highs. Nigeria’s continued export of crude oil exposes Africa’s biggest economy to severe external shocks.

Two months ago, at Nigeria International Petroleum Summit 2020 in Abuja, Mele Kyari, the group managing director of Nigerian National Petroleum Corporation said Nigeria “can provide energy for the whole of Africa. As we all know, 90 percent of the petroleum products consumed in Africa are imported, and that must stop. Our refineries must come back.”

While this is the sensible thing to say, there are many unresolved questions around the role of the government in building and operating refineries. Data released in January by the Nigeria National Petroleum Corporation (NNPC) show the country’s three governmentowned refineries had an operating deficit of N123.20 billion between January and October 2019.

The highest average capacity utilisation of the three refineries in 11 years from 2008 to 2018 was 26 percent recorded in 2009, while the latest data from NNPC showed the three refineries currently operate at zero percent capacity utilisation.

“The problem is not that the refineries are old or obsolete; the oldest refinery in Nigeria is younger than the oldest refinery in Europe. The problem is who is managing them?” Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER), asked.