Petrol import: Buhari, when will it end? – Punch

Distressing news of our poor economic management practices pierced through the hoopla over the just concluded elections: the government spent N2.95 trillion on petrol imports last year, an almost 50 per cent rise over the 2017 figure and almost one-third of the 2018 national budget of N9.1 trillion, according to the National Bureau of Statistics. When a country spends most of its revenue importing a product made from a raw material it has in abundance, halting the frenzy should be a national emergency.

In the management of the country’s most valuable natural resource, successive Nigerian governments have demonstrated neither shame nor acumen. Lacking the essential ingredients of vision and selfless leadership that have elsewhere enabled emerging economies to become champions, they have persisted in an unsustainable economic model that depletes resources, pauperises Nigerians and bewilders the world. Consider the obvious absurdity: the Nigerian National Petroleum Corporation said crude oil production was 2.09 million barrels per day in 2018, which was nine per cent higher than the 1.86 million bpd average in 2017. Yet, the NBS data shows that the country spent N1.97 trillion on petrol imports in 2017, N1.63 trillion in 2016 and N1.14 trillion in 2015.

The N114.3 billion that its four refineries posted as losses in the first 11 months of 2018 would fund 500 primary health centres at the cost of N21.95 million per unit – the government could only build 91 units across the country in 2014/15 – or two modular refineries, or complete the rehabilitation of the Lagos-Ibadan Expressway, or construct 20 mini/micro water works.

Petrol accounted for 22.4 per cent of the country’s total import bill in 2018, rising from 20.6 per cent in 2017, 18.4 per cent in 2016 and 17 per cent in 2015. This figure excludes subsidy payments and the sums spent importing other refined products; for instance, of the 6.14 billion litres of refined petroleum products imported in Q1 2018, 954.47 million litres were Automotive Gas Oil (diesel) and 66.91 million litres were kerosene.  The waste is mind-boggling and official indifference to it stupefying. The Minister of State for Petroleum Resources, Ibe Kachikwu, in 2017 put annual spending on petrol imports at $28 billion, with 40 per cent of this spent on “logistics.” It is difficult to imagine that though it spent N1.24 trillion importing petrol in 2015, yet, instead of radical steps to reverse or reduce it, Nigeria carries on with the policies that entrap it in such a quagmire.

This is a reflection of how the country runs its oil and gas sector with the NNPC as its fulcrum. Its reported loss of N228.1 billion between April and November 2018 is typical:  perpetually running at a loss, with cumulative deficit of N114.3 billion in January-November 2018, capacity utilisation in the refineries was zero in some and did not rise beyond 22 per cent in any of the four refineries located in Port Harcourt, Warri and Kaduna.

This charade is killing the economy. That a monopoly serving a market with an official daily demand of over 60 million litres still manages to run at such huge loss must be a world record. Not even the provision of 445,000 barrels of crude per day (their combined installed capacity) at preferential prices to the NNPC to refine or exchange for refined products, has been sufficient to transform the refineries into going concerns.

President Muhammadu Buhari should drop his obduracy: Nigeria’s economic salvation lies only in privatising and deregulating the oil and gas downstream. Private capital and competition in crude refining will not materialise until this is done. The brave effort by the Dangote Group through its planned 650,000 barrels per day refinery in Lagos State, commendable though it is, may end up as another monopoly in an operating environment with practically no anti-trust legislation. A robust regulatory framework, targeted incentives in the form of waivers, tax holidays and exclusivity periods should replace the fraud-ridden cash subsidy regime to marketers and transporters to draw in foreign direct investment in local refineries.

The world’s biggest refining nation, the United States, has no state-owned refinery just as Japan and South Korea, at fifth and sixth positions respectively, rely on private sector ingenuity. Emerging economies too are increasingly turning to refining as new technology transforms the US to top crude oil producer. It further cut its imports of Nigerian crude by another 43 per cent in 2018. Other countries are creatively reforming their energy sectors and optimising resource utilisation. Qatar Petroleum has created the world’s biggest Liquefied Natural Gas business, reports Petroleum Economist,an online, resource, while Saudi ARAMCO “is turning to state-of-the-art downstream projects too.”  ADNOC, owned by Abu Dhabi, one of the seven emirates that make up the UAE, has sealed a deal with an Italian/Austrian consortium in privatising its downstream operations. China powered its way to the world’s second biggest refiner by 2016 and one of its NOCs, PetroChina, had once been the world’s biggest spender on R & D, said Booz & Co, a consultancy that has since been acquired by the PwC.

Responsible behaviour demands that we stop this reckless practice. Buhari and the National Assembly should seek self-sufficiency in domestic refining through market-based reforms. The NNPC should get its hands off the downstream completely as state participation drives away private capital, entrenches inefficiencies and corruption. Apart from transparent, targeted sale of wholesale and retail businesses, the railway reforms prepared by the Bureau of Public Enterprises should be dusted off and that sector liberalised as well. The state should strictly remain a facilitator of a liberalised operating environment and regulator.

With the political will, the refineries can be sold in a few months, but the game-changer will be a market environment that can attract FDI and foster a revolution similar to the telecoms makeover.

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