Nigeria’s oil behemoth, the Nigerian National Petroleum Corporation, is up to its old tricks once again. Unable to drown out the rising voices calling for the sale of the country’s four moribund, money-guzzling refineries, the notoriously inept government agency is now hatching another plan, ostensibly to boost its capacity utilisation, which it claims would end further fuel imports in the “next few years.”
Elucidating the plan in a recent statement, its Group Managing Director, Maikanti Baru, said the corporation would take the capacity utilisation of the refineries to 60 per cent by the end of the year, and then 80 per cent by the end of 2018. The refineries, collectively, have been underachieving in the past two decades. “It is the procedure or methodology that we are changing a little bit; we are focusing on the process licensors to come and audit our process units in the various refineries,” he explained.
This piece of news appears exciting; but it can only be celebrated by those not conversant with the sordid history of the corporation and its (mis)management of the refineries. Anyone familiar with similar promises in the past would know that it is another grand design to channel public fund into a wasteful venture. In fact, Baru’s current proposal is hardly different from what one of his predecessors, Abubakar Yar’Adua, did to justify the reversal of the sale of the refineries effected by the Olusegun Obasanjo administration in 2007.
Citing complaints that they were sold cheap while the process of sale lacked transparency, the late Umaru Yar’Adua had reclaimed the 51 per cent government interest in the Kaduna and Port Harcourt refineries sold to the Bluestar Consortium soon after he assumed office as president in 2007. The then NNPC GMD, Abubakar Yar’Adua, boasted that he would revamp the refineries, only for money to be pumped in for a turnaround maintenance that turned nothing around.
So much of the country’s resources have gone down the drain under the guise of making the refineries work again. It is estimated that the TAM gulped about $1.74 billion between 1999 and 2016, $1 billion of which had already been spent by 2007, according to a former NNPC GMD, Funso Kupolokun.
It was also reported that the former Minister of Petroleum Resources under the Goodluck Jonathan administration, Diezani Alison-Madueke, planned to get a $1.6 billion Chinese loan for yet another TAM in 2014. Three years after, Nigeria still remains a net importer of refined petroleum products; it has been so for decades now, which is scandalous for a country that is a leading crude oil producer.
Alison-Madueke had regaled Nigerians with stories of how the original builders from Japan would be engaged to bring the four refineries in Kaduna, Port Harcourt and Warri, with a combined capacity of refining 445,000 barrels per day, up to 90 per cent functionality. This also failed, fuelled by corruption.
A 2006 report by Hart Resources Limited, quoting the Nigeria Extractive Industry Transparency Initiative, claimed that it was deliberate acts of sabotage that were militating against the efficiency of the refineries, “since an apparent gain could be made by choosing to sell (NNPC’s allocation of the 445,000 barrels of crude oil) rather than refine.” Another report quoting NEITI also noted that for a period 21 months – between January 2015 and September 2016 – the refineries worked for only 8.55 per cent of their combined installed capacity. The report said that the refineries did not process crude oil at all for seven out of the 21 months under review.
Contrary to claims in the early days of the current administration that the refineries had been rehabilitated by local engineers and were close to working at full capacity, it was reported towards the end of last year that the combined capacity utilisation in September was just 1.96 per cent. The capacity utilisation of the Warri Refinery and Petrochemical Company in October 2014 reportedly stood at 1.42 per cent, while that of the remaining three was zero per cent.
Experts are therefore of the opinion that the best way to get out of the trap is to sell the refineries as a first step to getting the government completely out of the downstream sector of the oil and gas industry, and it is encouraging that government is also thinking along that line. The point of departure, however, remains the plan to repair before putting them up for sale. The reasonable thing to do now is to sell them the way they are. What other evidence of this does anybody need than the Minister of State Ibe Kachikwu’s testimony in November last year that the refineries would become scrap by the time Dangote Group’s refinery comes on stream in 2019?
Among those that believe that the refineries cannot be effectively managed by the NNPC and should therefore be sold are the former President, Olusegun Obasanjo, and even Alison-Madueke, who famously said, “Government does not want to be in the business of running major infrastructure entities and we haven’t done a very good of it over these years.”
Curiously, Kachikwu, a strong proponent of the sale of the refineries upon his appointment in 2015, is now throwing his weight behind the bid to “revive” the virtually dead contraptions. He has even toyed with the idea of private investors co-locating new refineries with the existing ones. But this is not altogether strange, given the fact that the country’s centralist President and substantive Petroleum Resources Minister, Muhammadu Buhari, has said that the refineries should be fixed before they are eventually sold.
The gargantuan corruption prevalent in NNPC has been further fuelled by the government’s resort to subsidising the pump price of petrol over the years, where a nationwide protest in 2012 exposed N2.53 trillion scandal, out of which N1.7 trillion was skimmed off by fraudulent businessmen colluding with corrupt government officials. With his comment last year that “they (the refineries) start for one day, and then they shut down again…,” even Kachikwu himself has not failed to notice the problem.
Still, our position is that the refineries be sold without delay. The sale of the refineries will not only relieve the country of the burden of spending billions of taxpayers’ money on the so-called TAM, but will further open up the sector to private investors who are just waiting for the government to leave the scene. The refining sector, which will save the country a lot of foreign exchange spent on imports, offers a critical window to escaping the current recession.
