National oil company, the Nigerian National Petroleum Corporation, made known its intention to remain an important player in the downstream sector of the oil and gas industry when it recently announced plans to build more mega petrol stations across the country. The NNPC Group Managing Director, Ibe Kachikwu, who is also the Minister of State for Petroleum Resources, confirmed what appears to have been in the pipeline for long at a news conference in Abuja.
Citing the need for efficient, countrywide distribution of petroleum products, the minister said, “Definitely, there are many filling (petrol) stations we are trying to develop, working with the governors in terms of land, local government areas. The idea is to be able to expand our wings in crisis periods.” Already, the state-owned enterprise says it has taken over 133 petrol stations from independent marketers who are willing to partner the corporation, adding that the arrangement would expand the mega and floating stations which now stand at 37 and 12 respectively across the country. In all, the plan involves about 800 NNPC petrol stations, according to Kachikwu.
Kachikwu is building on the missteps of Sanusi Barkindo, one of his predecessors who once boasted that the NNPC would own 50 per cent of petrol stations in the country. “In all developing countries, their national oil companies operate across the supply chain, including the strategic downstream sector and it is not only seen from commercial perspective but also from national security implications. You cannot hand over that sector to a group of people, private individuals, who you cannot predict their political coloration, cannot predict the decision they may take and the implication of such decision,” Barkindo had said.
But nothing could be more ill-advised and out of tune with global trends, where government divestment from businesses that could best be handled by private investors is fast becoming the most preferred option. Agreed that it may be motivated by good intentions – to check the greedy and unscrupulous attitude of marketers who would go to any lengths to hoard petroleum products in order to create artificial scarcity and maximise profit – yet it cannot justify the commitment of more resources to a business like the building of petrol stations when privately-built ones are springing up almost on a daily basis in every nook and cranny of the country.
Even then, it will be interesting to know how many of the NNPC retail outlets have been faring. Many of them are not distinctly different from the privately-owned ones. In May 2013, it was reported that the Department of Petroleum Resources sealed off nine petrol stations, including one NNPC mega retail outlet in Enugu, for allegedly under-dispensing fuel and other petroleum products. During the last petrol scarcity late in 2015, many of the petrol stations shut up shop or reduced their fuel dispensing units to just one or two, fuelling long queues and compounding the suffering of motorists.
Considering the high level of corruption and the poor track record of government in Nigeria running business ventures, it should rather restrict itself to a regulatory role, while competent private sector players are licensed to play, especially in the downstream sector. Government’s poor record is evident in the shoddy manner it has been running its refineries, its various steel companies and other business ventures it has been involved in, which have been draining the public purse rather than making profit.
Besides, the NNPC’s financial position has not been encouraging in recent times, which supports the belief that it should reduce its involvement in the downstream sector of the oil industry. Published figures in its monthly report on operational and financial dealings revealed that the national oil company remitted $607 million to the Federation Account while recording a loss of N14.3 billion in November. It is, therefore, odd that a company that has been recording losses would still continue to dig in and commit more resources to a business it lacks track record in running successfully. The NNPC should learn some lessons from the loss-making Emirates National Oil Company, a Dubai-owned oil fuel retailer. Dubai has reportedly spent billions keeping ENOC afloat.
Even for better run and profit-making national oil companies, the privatisation option is becoming more appealing, which is why the Saudi equivalent of the NNPC, Saudi Aramco, is already giving it a serious consideration. In a BBC report, quoting The Economist, Saudi Arabia’s Deputy Crown Prince, Mohammed bin Salman, confirmed that the sale of shares was being considered, which would make Aramco the world’s most valuable listed company. “Personally, I’m enthusiastic about this step. I believe it is in the interest of Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco,” he reportedly said.
Apart from sparing the government the burden of spending hard-earned taxpayers’ money to prop up sinking, poorly-run and corruption-ridden business ventures, selling off government-owned firms is a credible way of raising funds in these financially difficult times. Again, the BBC report on Aramco illustrated this clearly by claiming that even if only 20 per cent of Aramco – a company valued at $1 trillion – was sold, it would fund Saudi Arabia’s budget for a year. This is the direction that the Buhari government should be looking at instead of embarking on another wasteful spending to build petrol-stations. Kachikwu’s concern, rather, should be how to make Nigeria not only self-sufficient in refined petroleum products, but also develop the capacity to refine most of its crude oil for export.
