The petrochemical industry plays a crucial role in bolstering the economy of any given nation. This sub-sector of the petroleum industry provides us with a wide array of products like kerosene, LPG, diesel, ethane, plastic, rubber, yarn and some crucial raw materials. The petrochemical industry sustains sectors like electronics, packaging, automotive, construction, textile and agriculture.
Nigeria is Africa’s top oil producer and has oil and gas resources in abundance- sufficient for the petrochemical industry to grow by leaps and bounds. However, the Nigerian petrochemical industry is plagued by numerous factors, which have hampered its growth.
Refineries are a major source of feedstock for the industry; however the miserable condition of the nation’s four refineries is not an encouraging prospect. The low refinery capacity utilisation is taking a toll on the industry’s output, forcing the nation to rely on imports. The Petroleum Industry Bill (PIB), which is supposed to encourage investment in gas development, will give the industry a much needed respite. However, the delay in the implementing the bill has also stifled the industry’s growth.
Considering the sorry state of affairs, the proposed privatisation of the refineries represents a glimmer of hope for the moribund industry. Thus, from the first quarter of 2014 private investors will have the opportunity to save the refineries from sinking. Take for instance the remarkable transformation of the Indorama Eleme Petrochemicals Limited (IEPL) following privatisation of the company in 2006. The company accounts for a major share of local manufacturing of petrochemicals and meets the demands of the local plastic industry. IEPL has reduced the country’s dependence on imports by 25 per cent- a remarkable feat. It also accounts for 10 per cent of Nigeria’s non-oil exports.
This change in the fortunes of IEPL has not only boosted polymer production, but has also helped accelerate growth of industries such as plastic bags, packaging, containers and woven sacks. The IEPL success story is a testimony to the fact that if Nigeria works toward creating a favourable investment climate, the nation’s aspiration to become a hub for petrochemicals can be realized.
Less resource-rich countries like South Africa have a strong petrochemical industry, which is based on coal feedstock. The country has to rely on Mozambique for gas and has still managed to build Africa’s largest petrochemical industry. However, Nigeria is blessed with vast gas reserves, but continues to lag behind. The nation should use its vast resources strategically to maximise the industry’s potential.
Once the petrochemical industry strengthens its foothold, industrial manufacturing will flourish. It will generate employment for millions of the unemployed in the country and will lower the amount of foreign exchange spent on importing petrochemical products.
The government should waste no time in addressing issues of weak infrastructure and poor legislation. The need of the hour to create a favourable investment climate as this would encourage more investors in the industry.
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