To end what has become an enduring burden, investors should be encouraged to establish local refineries
Although the off the cuff remarks by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu (that he was no magician who could conjure fuel availability), may have exacerbated the fuel crisis, the root of the current woes lies elsewhere. But what Kachikwu’s remark and subsequent explanations have done is to raise the question as to whether Nigerians would ever see an end to the perennial shortages that have come to define the management of the downstream sector of the petroleum industry. It is an issue that should worry the current administration, especially since there seems to be no coherent policy in place to deal with the issue in a holistic and lasting manner.
In virtually every town across the nation today, motorists are going through gruesome times to get petroleum products. In most instances, the desperate ones pay between N150 and N300 for a litre of petrol at the black market as the scarcity continues to impact negatively on socio-economic activities. To worsen matters, most of the access roads in major towns are blocked as a result of long vehicular queues. Besides, law and order often break down in many fuel stations as Nigerians struggle to fill their tanks, power generating sets and other fuel consuming machines.
As we stated in previous editorials on this issue, the sloppy handling of what is clearly a reform agenda, however well-intentioned, could put its implementation at serious risk and that perhaps explains the problem Nigerians are experiencing today. That is why we advocated a genuine and transparent dialogue between the federal government and critical stakeholders, including organised labour, where all the issues would be put on the table and a lasting solution found. For now, the falling price of crude oil at the international market is the “saving grace”. But that is not even enough to prevent the perennial fuel scarcity.
Going forward, there are a number of things that would need to be done. We need to sell off the old refineries that have become huge drains on scarce resources. Despite initial claims of robust performance, the refineries in Port Harcourt, Warri and Kaduna have actually recorded average capacity utilisation of 10 per cent last year, according to the Nigerian National Petroleum Corporation (NNPC). The NNPC report indicates that between January and August 2015, the three refineries operated at a total loss of N31.682 billion, with the Kaduna refinery accounting for the highest loss of N26.183 billion while the Warri and Port Harcourt plants made losses of N8.496 billion and N8.057 billion respectively.
It is doubtful if many Nigerians were surprised by the report. Over the years, the refineries have continued to fail in terms of satisfying the essence of their establishment, given that the importation of petroleum products has become a major and running routine in the economic management of the country. The reason, as often adduced by industry experts, is that the refineries have either all broken down due to the poor maintenance culture or that installed capacity cannot meet the ever-growing local demand for petroleum products.
While it makes no sense that Nigeria continues to import finished petroleum products at huge cost to the economy, experience has also shown that the government is not adept in the efficient management of businesses. If anything, the tales of corruption, ineptitude, sabotage and other sharp practices in the oil and gas industry have continued to confirm this widely held opinion. That is why we believe that with proper structures and incentives for the private sector, local refining of petroleum products is the only way out of this perennial crisis. But for that to happen, the policy instruments in the sector would have to change.
