Let go of refineries

 

IN a move that can only prolong Nigeria’s suffering under the current regime of imported refined petroleum products, which has also denied the people the benefits available to citizens in an oil producing country, the government has decided, ill-advisedly, to maintain its hold on the country’s underperforming refineries. A recent statement credited to the Bureau of Public Enterprises, the agency charged with the implementation of government’s privatisation and commercialisation programme, said privatising the government-owned refineries would only be feasible after the passage of the Petroleum Industry Bill into law.

To start with, it is heart-warming to hear that the government is at least giving the idea of privatising the refineries a thought. But it is also baffling, if not downright ridiculous, to attempt to tie the sale of refineries to the passage of the PIB. What has the PIB got to do with privatisation of ailing refineries that have continued to gulp billions of dollars of taxpayers’ money in maintenance cost? Why hinge the privatisation of refineries on a bill that has made very little or no progress after spending years at the National Assembly? And with lawmakers from a section of the country vowing to frustrate its passage, what is the guarantee that an oil industry law will ever see the light of day? The privatisation law adequately takes care of selling state-owned enterprises.

Over the years, the government has shown open reluctance to let go of the refineries, in spite of the overwhelming evidence of their mismanagement. Under the supervision of successive administrations, the refineries have failed to meet their targets. As Africa’s largest crude oil producer, Nigeria envisaged refineries that would enhance local refining capacity, not only for local consumption, but also for the export market. By so doing, they were supposed to buoy the economy and create jobs.

But rather than fulfil those dreams, the refineries have become by-words for ineptitude and corruption. Every year, millions of dollars is voted for turnaround maintenance, which never turns around the fortunes of the refineries. While the Port Harcourt Refinery I and II; the Warri Refining and Petrochemical Company; and the Kaduna Refining and Petrochemical Company, were conceived with a combined refining capacity of 445,000 barrels of crude oil per day, they have hardly been able to achieve 20 per cent capacity utilisation.

The Nigerian National Petroleum Corporation has admitted that the refineries were able to achieve a paltry combined average capacity utilisation of 21.5 per cent in 2010, a significant improvement on the 10.9 per cent recorded in the preceding year. The average for 2008, at 24.11 per cent, was only marginally better than that of 2010. Yet, these were achieved after the government had spent $92 million on TAM in 1998, $100 million yearly in the periods before then, and about $400 million between 1999 and 2003. Kaduna refinery alone gulped $54 million in 2007.

Despite the inability to meet installed capacity, the NNPC continues to collect 445,000 barrels of crude oil daily, ostensibly to feed the refineries. This is instead pushed into the international crude market for sale, only for the NNPC to pocket the money. Every attempt by the National Assembly to make the NNPC account for the money is arrogantly resisted.

In the meantime, Nigeria becomes a big import market for refined products, with the accompanying subsidy fraud costing the country over N2 trillion, about 50 per cent of the national budget, two years ago. Businessman, Aliko Dangote, while unfolding plans to build Africa’s largest refinery, noted that Nigeria spent about $30 billion annually to import petroleum products. As if that is not bad enough, some of the imports come from neighbouring Niger, which only recently discovered oil in commercial quantity.

Curiously, the more money spent, without any visible result, the more the government that claims to have no money to pay striking doctors or lecturers continues to pump in more money for TAM. Nobody ever gets punished for the TAM not producing the desired results. Currently, a whopping sum of $1.6 billion has been earmarked for TAM that, according to the Petroleum Minister, Diezani Alison-Madueke, will bring the refining capacity to 90 per cent. Even the $1.6 billion is borrowed.

Everybody, except perhaps the government, knows that nothing good can ever come out of TAM. It is about corruption, a grand design to continue to siphon public funds, which must be stopped. The only way out of this cycle of fraud is to sell the refineries so that the new owners can use their own money for TAM whenever they deem it fit to do so.

Unfortunately, when the government was courageous enough to privatise the refineries in 2007, the next administration, under the late Umaru Yar’Adua, promptly reversed it, hypocritically claiming the lack of transparency in their sale. Those who thought the reversal was meant to pave the way for more transparency in the privatisation process are still waiting. Since then, nothing has happened except more fraud, more TAM and more imports of refined fuel.

It should therefore not be surprising if the latest move by the BPE is conceived as another ploy by the government to prolong its control of the refineries and perpetuate the corruption that goes with it. There is no sign the PIB will be passed before 2015. But the right way to go is to get rid of the refineries. Government in Nigeria has never been a good business manager. Just as the government has finally managed to sell off the ailing Power Holding Company of Nigeria, the National Council on Privatisation should relieve Nigeria of the burden of propping up refineries that are a drain on the economy.