April 21, 2024

FG time to sell the refineries

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The recent macabre move by the Nigerian National Petroleum Company Limited to outsource the management of its largest refinery in private hands is an unfortunate red herring and the most potent expression of ambivalence on where actually the government stands on the question of privatisation.

For many Nigerians, the bid to entrust the management in private hands is an attempt by the state to eat from both sides of the mouth and to regurgitate already swallowed morsel of pounded yam. This is unfortunate given the sociology and the history of the refineries. It throws up the prebendary nature of our economy and how unserious we are as a nation, calling in question the abilities and capabilities of managers of vital sections of our economy.

It gives the impression that the current administration is fervently and spiritedly attempting to dodge full-blown privatisation, thereby serving as a bulwark to potential growth in the industry, robust revenues for the government, and a lease of life for Nigerians.

Not too long ago, Nigerians were treated to a hollow ritual when NNPCL stated that it had completed the rehabilitation of the 210,000-barrel per day Port Harcourt Refinery in Rivers State with a loan of $1.5 billion and was sourcing for private hands to operate and maintain it. The NNPC will hold on to its overall management. What does that mean!? And what reading book offers such ambiguity? Later, the statement was reformulated to mean “technical” completion!

Even at that EnergyDay wondered, in whose interest was the whole macabre drama staged? The whole imbroglio was deliberately hatched to dodge full privatisation which is the way of the international best practices. Nigeria can not lay claim to any significant reforms of the oil sector even with PIB if the refineries are not fully privatized, the case of the unbundling and privatisation of NEPA with government still holding on firmly to generation is an example of how not to go about privatisation. The government wants to remain a player in the downstream sector instead of totally unbundling the firm, and focusing on regulation and collection of taxes and royalties.

For Nigeria, which is spending trillions of naira to import fuel because its refineries have been dormant for decades, there is no hiding place but to privatise.

This situation is compounded by the turn around maintenance cost spent on the four state-owned refineries over the years without result. This was N11.4 trillion, $592 million, €4 million, and £3 million from 2010 to 2020, the Senate stated. It paid N127 billion as salaries, wages, and employee benefits to NNPC staff at the Kaduna, Warri, and Port Harcourt refineries between 2020 and 2021, per Dataphyte.

Nigeria should not be locked inside itself. In the United States, the government owns none of the 132 refineries, which refine 19.68 million bpd or 20.3 per cent of the daily global consumption. The 15 members of the Canadian Fuels Association operate along the same lines after the government sold Petro Canada to Suncor Energy.

Therefore, the Bola Tinubu government needs to create a level playing field in the energy sector instead of stifling same. While the upcoming Dangote Refinery and other privately-owned modular refineries across Nigeria underscore promise in the equitable distribution of crude, competitiveness, and growth, the influence of the NNPC in the sector hobbles the same.

Instead of controlling the refineries, the government should concentrate on pressing matters in the industry. In August 2023, the National Security Adviser, Nuhu Ribadu stated that Nigeria was losing 400,000 barrels of crude oil per day to vandals, criminals, and economic saboteurs.

A report stated that Nigeria lost $10 billion to large-scale crude oil theft between January and July 2022. Between December and the first five days in January 2024, reports stated that the NNPC recorded 157 incidents of crude oil theft across the Niger Delta. Oil spill is an environmental concern.

Recently, the Shell Petroleum Development Company, despite operating in Nigeria for decades, divested its onshore assets to a private consortium, Renaissance, due to oil theft, sabotage, operational issues, costly repairs, and high-profile lawsuits for $2.4 billion. The government and the NNPC should focus on fixing the impediments that pushed Shell to divest.

Therefore, Tinubu should sell the refineries to competent international companies. This will generate ample FDI; government will benefit further as it will stop paying salaries and other running costs and stop borrowing for rehabilitation.

To revitalise the sector, the Tinubu administration must discontinue the statist policies of his predecessor, who merely changed the name of the Nigerian National Petroleum Corporation to NNPCL but retained government’s overbearing influence and control over the company.

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