In 2009 and some of 2010 these refineries operated at their lowest levels of between 0 and 30 per cent of capacity, and led to the country importing about 85 per cent of its fuel needs. By early 2011, operational capacity increased slightly but the country still required product imports to meet domestic demand. So, in its wisdom, the government said that they estimated the domestic market required the refining of 445,000 barrels a day of crude to supply the local market. They would deliver these barrels of oil at the domestic price for crude to major international companies like Trafigura and Glencoe who would export the crude oil from Nigeria and import the refined products back to the country. This was arranged by the Oil Minister, President Obasanjo who was doubling up his roles in defiance of a Constitutional inhibition on holding two office of state.
When these refined products reach Nigeria they were handled by local oil traders. The list of these traders is very revealing; as a substantial number are linked to ex-Presidents Babangida and Obasanjo or their immediate circle. Obasanjo didn't waste his time in immersing himself in that part of the industry. His son and the sons of some of the other politicos operated the fuel import business into Nigeria. To assist them the government paid the local traders a subsidy, a ‘fuel subsidy’ to keep the market price down for local consumers. These were substantial sums.
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This was a high reward for keeping the price subsidised; in recent years the range has been 400% to 550%. When the government tried to remove the subsidy from the fuel this would have made the heavy extra payments the responsibility of the consumers, not the government and has been a bone of contention on a regular basis. As recent parliamentary report showed that in the last two years the oil traders had siphoned off US$6.8 billion for fuels they supplied and often didn’t supply to the market.
What the National Assembly overlooked is that the Nigerian government ships barrels of oil to be refined for the Nigerian markets and imports PMS (motor spirit) diesel and kerosene back to Nigeria at prices equivalent to world market levels. What is missing from the accounts is the rest of the barrel.
Oil refining means using a fractional distillation column to refine different types of oil products based on their boiling point.
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So, if the traders bring back to Nigeria the gas oil, gasoline and kerosene, what happens with the remaining parts of the refined oil products? If the crude oil exports of the 445,000 barrels a day are only bringing back to Nigeria the PMS, kerosene and diesel, where is the value for the rest of the barrel? Who has the money for the butane, propane, residual oils, asphaltenes, etc. which are an inevitable result of the refining process? These favoured exporters of oil not able to be refined in Nigeria are getting the oil at source at a considerable discount. Including shipping costs to the US Gulf the net cost is under $30.00 a barrel. They are shipping back PMS, kerosene and diesel at the world price for these products. Right now the price of fuel in Nigeria is more than the price of similar fuel in Texas made from Nigerian crude.The sale of the rest of the barrel is not being returned to Nigeria as cash or additional product. As these represent, even with the best of cuts of the fractioning column, slightly more than half of the value of the barrel this is a tidy profit for those who are in the subsidy business. As this crude no longer goes to the U.S. the traders are looking for other co-operative refineries. These sums have never been accounted for to the Nigerian people.


Culled from
https://www./article/20141029164515-163605418-night-is-arriving-in-nigeria-dr-gary-k-busch