- N148bn spent on refineries is avoidable waste if energy sector had been well run
At the heart of the metaphorical existential contradiction of the Nigerian state is the idea that a country exports its crude to other countries to be refined, then pays the same people to buy back premium motor spirit (petrol) and other by-products of refined crude.
Sadly, successive governments have not succeeded in getting any optimal productivity from our refineries. On the contrary, billions have been spent doing the now infamous Turn Around maintenance (TAM) without a commensurate increase in production capacity. The Nigerian National Petroleum Corporation (NNPC) has over the years continued to lament the losses the country suffers due to the inability of those charged with carrying out the necessary TAM to put the refineries in top shape for maximum production output.
The most recent report that the government spent N148bn on three refineries in the last 13 months is as shocking as it is disappointing. Despite this huge expense, the refineries produced less than 40,000 metric tons of crude oil. A June report by the Nigerian National Petroleum Corporation (NNPC) which made the disclosures also attributed the operational shortfall to the ongoing rehabilitation of the refineries which have a combined production capacity of 445,000 barrels per day (bpd). “The declining operational performance is attributable to ongoing revamping of the refineries which is expected to further enhance capacity utilisation once completed,” the NNPC said in its report. What is particularly disturbing is that some of the refineries, like the ones in Warri and Port Harcourt, which sometimes recorded zero production, still gulped N42.1 billion and N43.8 billion, respectively, of the taxpayers’ money within the period.
It is not that such heartbreaking news is new to Nigerians, what is particularly appalling is that the present government has been treading the same path of avoidable wastage of public resources on refineries which are yielding less than proportionate returns.
Yet, Nigerians had great expectations when the Buhari administration took over and promised to do business unusual. Hopes were further raised when the president decided to handle the petroleum portfolio, based on his experience as former petroleum minister, and appointed Dr Emmanuel Kachikwu, an expert in that sector, as minister of state. Unfortunately there appears to be divergent of opinion between the president and Dr Kachikwu, especially on the vexed issue of deregulation.
Interestingly, that path once despised, is now being trod by the government. As far back as 2014, a PriceWaterhouseCoopers forensic audit had recommended a total cleanup of the model of government’s continued funding of the refineries and recommended their privatisation, instead. It was not until April this year that an idea of the Federal Government’s plan on the refineries was made public by Mele Kyari, NNPC’s Group Managing Director. That is about five years into President Muhammadu Buhari’s presidency.
We agree that the issue of fuel subsidy has always remained contentious in the country as in many other countries, especially because the reasons given for its withdrawal, especially here, have almost always been absurd. For instance, if government says subsidy is being used to defraud the government, people expected the government to fish out the thieves for punishment. That petrol is cheaper than a bottle of soft drink can also not be an excellent reason to justify subsidy removal. The most important question of those opposed to subsidy removal is that a major crude producing nation like ours should be able to refine its own petrol instead of importing the product, thus eliminating some avoidable costs.
However, now that the government says it has deregulated the sector, the only hope is that it would faithfully implement its policy of upgrading the refineries before handing them over to private investors in 2023 as it has promised. Whether this is not too long a period to still continue frittering away scarce resources on the refineries is a different matter entirely. But the question of scrapping them is not an option.
In the meantime, however, the N148 bn spent on the refineries in 13 months should be audited. We cannot continue to give the impression that we are so comfortable as to be taking these huge figures without interrogation.
