Let the refinery go

Sometime in September last year the federal government hinted that it would embark on “fresh multi-billion Naira repairs” to the three moribund oil refineries. I had hoped there would be a re-think because it needed no rocket science to see that it would be wise and proper to sell off these decrepit refineries as industrial […]

Sometime in September last year the federal government hinted that it would embark on “fresh multi-billion Naira repairs” to the three moribund oil refineries. I had hoped there would be a re-think because it needed no rocket science to see that it would be wise and proper to sell off these decrepit refineries as industrial scraps. I hoped in vain. The Executive Council of the Federation last week approved $1.5 billion for the rehabilitation of the Port Harcourt refinery. Call it the first step in a new wasteful jamboree that would, at the end of the day, bring us disappointment, disillusionment and the quiet shedding of tears.

In my column of September 27, 2020, I pointed out that the federal government decision was madness. I think so still. There may be some rhyme in the decision but it is impossible to find a good reason for it. Interestingly, the day after the council took the decision, The Punch newspaper reported that in five years -2015-2019 – the refineries earned a handsome N21 billion but, wait for it, made a stupendous loss of N778 billion. The NNPC report is a clear indication that the refineries are dead and it would be unwise to try and revive them. Sinking more money into them would not change anything. At the best of times, the Port Harcourt refinery with an installed capacity of 150,000 barrels per day, never quite met the target in a sustained way. Nor would the decision to waste this money stop our country from continuing to be a net importer of its domestic petroleum requirements. Here is what I wrote in the column titled Stop this madness.

• An Exit from Boko Haram? Assessing Nigeria’s Operation Safe Corridor
• 774,000 jobs: Buhari orders release of N60,000 to each participant

In its issue of September 18, 2020, the Daily Trust reported that the federal government was embarking on “fresh multi-billion-naira repairs” of the Warri, Kaduna and Port Harcourt refineries.

Here are the facts established by the newspaper: the federal government spent a cool N276 billion on the refineries in four years; Warri refinery has not produced a litre of petroleum product since 2016; it laid off 2,000 technical staff in January this year; Kaduna refinery has not refined petroleum since 2017; Port Harcourt refinery, like its Kaduna counterpart, has not refined one drop of petroleum since 2017. These refineries have been idle because they have been crippled.

Between 2013 and 2015, the government spent $396.33 million on their turn around maintenance that turned nothing around and maintained nothing. But since there was money to waste, no problem and so between 2015 and 2018 the government splashed another N276.872 billion on turn around maintenance. Nothing has changed in those refineries. Is it not madness for the government to embark on the pretence of repairing these refineries that have so far defied repairs and turn around maintenance?

This level of waste is a monumental scandal. Or, to put it more nicely, it would be a scandal in countries where leaders care for their integrity. That a country with four oil refineries is a net importer of fuel would be outrageous in any other country but our dear Nigeria. The government did not just wake up one day and found that the refineries had become moribund. No one was ignorant of the continuing problems with the refineries. They were set up at different times to produce enough petroleum products for domestic consumption and export to the West African sub-region. But they have been a huge disappointment. From what we know, none of the three refineries has ever produced to its full installed capacity. Their failure invited the motley crowd of fuel importers who were and still are, subsidised by the government to arguably bear part of the cost to save the local consumers from the vagaries of market forces.

These refineries are too old and too dilapidated. There is no argument about that. They cannot be economically repaired and therefore any attempts, for whatever reason, to repair them would only deepen our collective misery. The clear option before the government is to sell them off as scraps and use whatever is realised from the sales to build one modern refinery that would, together with the Dangote Refinery and the modular refineries in Bayelsa and Edo states meet our local fuel supply needs when they come on stream next year.

Better still, current conventional wisdom does not favour government investments in purely commercial enterprises. Such investments made sense when the country did not have enough local businessmen to run such enterprises. The situation is vastly different today. Nigerian entrepreneurs have since come of age. Government no longer has any business involving itself in commercial enterprises such as oil refineries when the private sector is better equipped to drive such industries.

Federal and state governments once invested heavily in such commercial enterprises as breweries, cement factories and transport services. Such investments were drains on the national purse. Anyone could see that. Former President Ibrahim Babangida saw it and decided to pull government fingers from every entrepreneurial pie. He introduced a privatisation policy under decree 25 of 1988. The decree obliged federal and state governments to fully or partially sell off government shares in commercial enterprises best left to the private sector. Thanks to him, governments pulled out their stupid investments in breweries and cement factories, among others. We still buy beer at affordable prices, I tell you. Come to think of it, which commercial enterprise set up by federal and state governments ever succeeded in the country? All of them were drain pipes, useful only for rewarding political supporters with board appointments.

The world has moved on. We must run a pure capitalist economy with government restricted to providing the enabling environment and, where necessary, regulations to ensure quality and safety, etc. President Muhammadu Buhari is the substantive minister of petroleum resources. He has held that position for the past six years. I thought his decision to run the ministry was based on his experience as a commissioner for petroleum resources and chairman of the board of NNPC in the Murtala/Obasanjo regime and that he wants to personally sanitize this vital national industry and end the scandalous and corrupt fuel subsidy regime.

I am willing to hazard a guess that he is not unaware that the three refineries have become a major source of financial waste as, in corruption I am sure he knows that these refineries are long past their due date and can no longer be economically repaired. I am sure he knows much better than the rest of us that it would be sheer madness for the federal government to now embark on the “multi-billion Naira repairs” of these refineries. In the end, the money would go down the drain; no one would be held responsible for the ill-advised repairs and once more the people would have been roundly cheated.

A few weeks ago, the president did the correct and courageous thing when he de-regulated the petroleum sector and allowed market forces rather than subsidy to determine the price of fuel. He still has to deal with the fall out of the decision, what with labour threatening to shut down the country over it. But such fall-outs could be managed in time. It was, I am sure, a painful decision for him to take at this rather rough times in the national economy, but some of us helped to justify it on the grounds that the subsidy did not benefit the people it was supposed to benefit. Better to turn off the spigot and let the subsidy billionaires stew. But sadly, subsidy is still with us, in case you cannot see through the opacity of the policy.

Buhari can take this to the next and logical level by fully de-regulating the federal government involvement in the petroleum industry. Government has no business trying to revive a dead horse. If the refineries could not meet our fuel needs when they were healthy, how can they do so now that they are obsolete? No turn around maintenance would turn them around. Everyone, except those who stand to gain from further waste on them, can see that it would be cheaper to build a more modern refinery than to keep them alive after a fashion. In any case, government has no business investing in or running refineries any more.

Aliko Dangote and other citizen-entrepreneurs are about to show that private sector investors can do a far better job of running refineries much more competently and to our collective benefit than the federal government has done all these years. Let the refineries go. The shame is not in letting them go but in the government foolishly holding on to them and willing to waste more scarce financial resources on them. These refineries have already achieved the status of a metaphor for waste and want. Enough.