THE latest bid by the Nigerian National Petroleum Corporation to raise $1.8 billion for yet another Turnaround Maintenance of its four refineries is an expensive charade. It represents a fresh chapter in the continued rape of the collective assets using the state-owned oil company and confirms anew the failure of President Muhammadu Buhari to deliver on his promise of change. He should stop this wasteful venture and undertake the sensible option of selling the refineries with speed.
The audacity of the Maikanti Baru-led NNPC management is provocative, but perfectly in tandem with the atrocious behaviour of his predecessors. Succeeding managements and governments mount the saddle, each promising change, but only to spend, borrow and splash money on refineries that have not achieved 40 per cent capacity utilisation in over three decades. According to the House of Representatives, which has resolved to probe the murky refineries issue, not less than $20 billion has been wasted on TAM and other repairs of the four refineries with little to show for it. A report jointly prepared by the African Refiners Association and the World Bank found that capacity utilisation in the four refineries over the years averaged a mere 18 per cent of their installed processing capacity of 445,000 barrels of crude per day. Egypt’s nine refineries (774,000 bpd capacity) averaged 81 per cent; Algeria’s five (303,700 bpd) 94 per cent; Libya’s five (380,000 bpd) 87 per cent and South Africa’s four (545,000 bpd) 85 per cent.
Buhari, again, like his predecessors, is the main problem: He is a statist and has broken his campaign promises to clean up the NNPC and restructure it into two entities. Most former NNPC GMDs have urged government to hand over the refineries to the private sector to manage. At a symposium in January 2015, the ex-NNPC chiefs confessed that they only took directives from the government.
Buhari, Ibe Kachikwu and Baru are unfair to Nigerians. The only rational thing to do is to sell each refinery “as is.” We disagree with Baru’s sophistry that TAM would make the refineries attractive to investors. This disingenuous, self-serving excuse has been used repeatedly to retain them, while condemning Nigeria to the ignominy of the world’s eighth largest crude exporter (2016), wasting scarce foreign reserves importing refined petroleum products. His promise that “…by the time we are done by 2019, these refineries will be as good as new” is unbelievable and unrealistic. The consensus of expert opinion is that the dilapidated facilities need much more than the $1.8 billion cited. Similar promises by the NNPC had proved false in the past. Never since 1999 have promised production targets been met. Meanwhile, the NNPC spends $16 million to $20 million per day importing refined products, Africa Business Insight reported in August 2016. The National Bureau of Statistics said N2.56 trillion was spent on this wasteful practice in 2016.
Rather than this profligate, futile venture, more investors like Aliko Dangote, who is building a $12 billion 500,000 bpd refinery and power plant in Lekki, Lagos, should be encouraged. Experts say about $1.5 billion will build a 100,000 bpd refinery instead of pouring money into ageing equipment that have not been properly maintained over the years. It is not the business of Baru to beautify refineries for investors: auction them off as they are and let those who are interested come; if no one is, all the better to mothball them and pave the way for newer, modern refineries. He and Kachikwu are fully aware that NNPC’s presence in the downstream scares off foreign investors and stifles competition.
The government should introduce and enforce legislation compelling oil majors producing above a certain threshold to take on at least 20 per cent equity in a local existing refinery or a start-up: national patrimony is the ability to dictate the rules; levy taxes and enforce your writ, not the misguided notion of oil sector unions who misrepresent it for continued, ruinous state ownership of business enterprises. Though not a major crude producer, Singapore’s ingenious leaders have turned the city-state into a major refining hub, processing 1.5 million barrels of crude per day.
Who will stop the Buhari government from this predatory, wasteful venture?