Nigeria: Sell the Refineries

(file photo)
9 December 2019

In the continuing efforts to revive the nation's four refineries in Port Harcourt, Warri and Kaduna, the Federal government signed Memoranda of Understanding [MoUs] with China, India, Saudi Arabia and Russia. No doubt this move was informed by the lack of progress in all previous efforts to make the refineries to work.

That our refineries which were built at great expense and expectation to meet our petroleum products consumption have not lived up to that has been a source of embarrassment. It is even more so when considered that Nigeria is in the league of the top ten hydrocarbon producers in the world with capacity to harness all aspects of the commodity. Nigeria continues to import refined petroleum products for its domestic consumption at great financial cost. Successive governments have tried to tackle this national malaise over the years but so far with very little positive results.

In signing MOUs with these four countries, the Federal Government hopes it will be able to succeed where other efforts have not yielded the desired objective. But we must note that MOUs in themselves do not translate into immediate success in our endeavour to revamp the refineries. There are technical issues which have to be considered regarding the state of the refineries. These include but not limited to their age, design specifications, state of equipment and facilities, spares and general serviceability.

We must also consider that the refineries were built by different engineering companies who would certainly have retained for themselves exclusively, as is the practice, some critical operational procedures of some of the core equipment that make the refineries work. Invariably if other parties other than the ones that built the refineries are engaged to do the revamp, it all too often produces negative results. In the case of the MOUs none of the companies that built the four refineries are from these countries. It stands to reason therefore that companies who may be engaged from the countries with whom the government signed the MOUs will most certainly hit a brick wall in their efforts to revive the refineries.

In the past, we note that governments have tried to farm out the turnaround maintenance of the refineries to individuals or companies who have little or no expertise in such matters. These then became conduits through which vast sums are siphoned out ostensibly to revive the refineries but which end up not doing the purpose for which they are earmarked. This has become a veritable cash cow for vested interests that will stop at nothing to ensure that refineries continue to rot. Indeed, for those with vested interests in the continuing non-performance of the refineries, it is an opportunity for a double take; siphoning money from dubious turn around maintenance and contracts for importation of petroleum products as a result of the comatose state of the refineries.

As a result of all these and many more observable lapses it is an understatement that most Nigerians have lost confidence in the ability of the public sector to manage the refineries. In this regard President Obasanjo had during his tenure issued licences to 18 private entities to build and operate refineries. But only Dangote Group has so far gone ahead in that direction. One of the main reasons has to do with the fixed prices for petroleum products in the country which potential investors see as a disincentive.

Accordingly, with the infractions observed in the management of the refineries, it is time to revisit the privatisation option which President Obasanjo started at the tail end of his tenure but which President Umaru Yar'adua cancelled because it did not follow due process. We should also revisit deregulation of the oil and gas sector. This should allow for interested private investors to either bid for the existing refineries or build new ones and hopefully ensure the optimal development of Nigeria's abundant hydrocarbon resources.

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