Ibe Kachikwu’s recent portrayal of Nigeria’s continued dependence on refined petroleum products imports as a fraud is an acknowledgement of an extant problem that needs to be confronted head-on. But much as the junior minister in the Ministry of Petroleum Resources has spoken spiritedly of the need for urgency to buck the trend, his enthusiasm is not shared by many. As a matter of fact, for many long suffering Nigerians, his passion can only be infectious if he backs it up with new and practical solutions; not the age-old insistence on throwing more money at the four loss-making and moribund state-owned refineries that have outlived their usefulness.
That Nigeria remains a net importer of refined petroleum products, despite being a major player in global crude oil production and exports, is not only an embarrassment but also a conundrum that has defied logic over the years. Equally puzzling is the lack of political will by the government to make the right choices that will end a wasteful and embarrassing venture that cost the country a whopping N2.53 trillion in a fuel subsidy scam in 2011 alone. A serving senator, Dino Melaye, recently called for the probe of a N5.1 trillion subsidy fund allegedly mismanaged by the state oil firm, the Nigerian National Petroleum Corporation.
One thing is however clear, the country has remained stranded in this position largely because of the lack of investment in new refineries since the massive imports started more than two decades ago. Rather than encourage private investments in that sector, it appears the continuous dependence on imports has benefitted corrupt government officials and their private sector collaborators who would rather enrich themselves from the opacity in the industry than stop the fleecing.
Successive administrations have presided over the dwindling fortunes of the refineries in Port Harcourt, Warri and Kaduna, paying lip service to their revamp. That the refineries are in a dismal state today is not for lack of funds for their upkeep; in fact, it seems the rate of deterioration has simply been in inverse proportion to the amount of money pumped into their maintenance.
Reports indicate that an estimated $1.74 billion went into the execution of turnaround maintenance between 1999 and 2016, out of which $1 billion had already been spent by 2007, according to a former NNPC Group Managing Director, Funsho Kupolokun. The immediate past Minister of Petroleum Resources, Diezani Alison-Madueke, also hinted at plans to fund the same project with a Chinese loan of $1.6 billion.
Nobody can gainsay the fact that the country should by now be awash with refineries if a fraction of what has been spent on TAM and fuel subsidy had been invested in the building of new ones. But it is clear that the government has failed in the business of running business. This has been exemplified by the depressing record of the NNPC, which has developed a habit of ratcheting up losses and massive debts, year in, year out. In 2016 alone, the state oil firm recorded a N197 billion loss, after posting a loss of N267 billion in the preceding year. It is therefore not surprising that the refineries are faring so badly under the superintendence of an incompetent and corruption-ridden NNPC.
Kachikwu has insisted on a deadline of between 2018 and 2019 for ending the fraud in the refined petroleum products imports. That is consistent with the period that the Dangote Refinery is expected to come on stream. With a refining capacity of 650,000 barrels per day, the refinery trumps the four state-owned refineries, which, put together, have the capacity to refine 445,000 bpd.
While the coincidence in the timelines is not lost on keen observers of events in the oil industry, the minister is actually looking beyond the Dangote Refinery, believing that the four underperforming state-owned refineries will eventually come alive. “Refineries will have to work. It is really not an option anymore. And not only should they work, they have to work quickly,” Kachikwu reportedly said at a stakeholders’ forum in Abuja last year.
Given their sordid history, it is curious how Kachikwu intends to resurrect the refineries that recorded a combined capacity utilisation of 1.9 per cent in September last year. By continuing to talk about carrying out further repairs to the refineries – and the enormous cost inherent therein – Kachikwu wants to continue doing the same thing while hoping for a different result. The best option for the government is to sell the refineries now – if they can find buyers – and look forward to encouraging more investors to follow the lead provided by Aliko Dangote, Africa’s richest man.
The longer the refineries remain with the government the more difficult it will become to sell them. Kachikwu, himself a former advocate of their sale, agreed as much last year when he said, “I can assure you that if the Dangote system works well, we will have scrap; we won’t have refineries, because by then it will be too late to do anything.” Now is the time not only to save taxpayers’ money by stopping the endless TAM but to encourage private investors to join hands with Dangote and turn Nigeria into a refined products’ exporting country.
