More than anything else, the altercations have inadvertently exposed why all the efforts to fix NNPC's four refineries always hit the rock.
For the past three weeks, the country has been roiled by a bitter row between the management of Dangote Refinery and oil sector regulatory authorities over the company's operational demands and standards. This altercation is needless in a polity where institutions dispassionately discharge their duties. The din arising thereof, is "shocking and creating bad waves for Nigeria globally," observed Mr Akinwunmi Adesina, president of the Africa Development Bank.
Earlier in July, officials of Dangote Refinery had accused international oil companies (IOCs) of denying the refinery purchase of crude oil, and that when they agree to sell, it is at a premium, which is $6 higher than the global market rate. Added is the continued issuance of licenses to petrol marketers to import the product - a move the company fears will hinder its operations. But in a counterclaim, the Chief Executive Officer of the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, said the Refinery's diesel that is already in the market is of an inferior quality compared to the imported ones.
Mr Ahmed was shy of saying the 650,000 barrel per day capacity refinery was presently operating illegally in the country. The regulator also accused the Dangote Refinery of monopolistic reflexes, with just a few weeks to unleashing its Premium Motor Spirit (PM) or petrol, in the market. In clear terms, the President of the Dangote Group, which owns the refinery, Aliko Dangote, expressed his concerns at the issuance of new fuel import licenses to market players when his refinery could actually meet local demand.
In the wake of all this has been a medley of responses from a broad spectrum of Nigerians. From the public gallery, many want the refinery saved from what is being perceived as official sabotage; given the importance of the refinery and its products to the country's economy. However, others insist on the sanctity of free market principles to forestall what could potentially result in market dominance or a monopoly. Having spent almost $20 billion to set up the refinery, it is no doubt within Dangote's rights to fight for its survival. No investor would have done otherwise, whether local or foreign.
Interestingly, the House of Representatives intervention in the broil seems to have revealed what could be considered an expression of bad faith against the refinery in the curious charges of the NMDPRA boss, Ahmed that the diesel it produces is of inferior quality compared to the imported variety, when there have been no clear or factual basis for this accusation.
This was evident in Dangote's swift response and challenge to the NMDPRA to disclose to Nigerians the laboratory where it conducted its tests and for two samples of diesel to be taken for newer testing to establish the truth. These challenges were not taken up by the regulator. However, at the behest of the visiting contingent of National Assembly lawmakers, these newer tests were eventually carried out, which revealed Mr Ahmed's claim to be sheer falsehood and an apparent de-marketing of the refinery for his own reasons. This reality should not be lost in debates, in order to properly situate the emergent snafu.
In Farouk Ahmed's claim, Dangote Refinery's diesel and others produced locally contain between 650 and 1200 parts per million (ppm) of sulphur, which makes the fuel toxic. But this turned out not to be the case. The tests showed that diesel produced by the Dangote Refinery actually has 87.6ppm of sulphur, whereas the imported ones have between 18,000 and 2000ppm of sulphur, thus making them highly toxic and really unfit for use. For this reason, the lawmakers demanded that the NMDPRA boss needed to be sacked. If the marketers of this product are the same breed of beneficiaries of the licenses issued to serve as the envisioned competition to Dangote refinery, then we say no to such arrangement.
It cannot be forgotten in a hurry how N1.7 trillion was lost to importers in the 2011 fuel scam, in connivance with some thieves in the bureaucracy. It is inconceivable, therefore, that this tainted template of fuel procurement is still preferred when a local alternative exists. And, it does not give any clean bill of health to the halved fuel subsidy programme of this government. A total of N5.4 trillion is earmarked for this in 2024. That Mr Ahmed rifled his unguarded salvo against this biggest Nigerian enterprise from the presidential villa, with the NNPCL boss, Mele Kyari, by his side, is tendentious, reckless and devoid of tact.
Competition, as we envisage it, should be home-driven. The Federal Government granted 25 licenses to investors for the setting up of refineries in 2016, but only Dangote took the bait. Now is the time for the country's three moribund refineries in Port Harcourt, Warri and Kaduna to be brought back fully on stream if the government's charges of seeking to prevent a monopoly are to be taken seriously. They have guzzled N12 trillion in dubious turn around maintenances since 2010. Ironically, the outcome of the Senate investigation into the scam in 2023 did not see the light of the day.
Consequently, in the face of these glaring facts, the NMDPRA helmsman has been disingenuous with his allegations. However, if the refinery emerges as some have labelled it, then it is because the government has made it so. In other jurisdictions, governments fight such monstrosity with stringent and well implemented laws. In Nigeria, The Federal Complaints and Consumer Protection Act fits this bill in this regard. If the law is observed in the breach, the agency in charge of the enforcement of its provisions should be held responsible.
Without a doubt, Nigeria is washing its dirty linen not just in the local public space, but in the international arena, with its inability to provide crude to the Dangote Refinery, thereby forcing it to seek recourse to Texas, US and Brazil for procurement to meet its production needs. This is after about four decades in which it had been the butt of jokes for being the only OPEC-member that imports its petroleum products.
There is the logic that NNPCL is hamstrung in meeting its earlier supply obligation to the refinery because of its several Special Purchase Agreements (SPA), and the repayment requirements in crude oil to AfriEximBank for the $3.3 billion facility it procured, among others. Yet, the Dangote, Watersmith, Aradel and other modular refineries have legitimate refuge in the Petroleum Industry Act, especially its Section 109 (2), which stipulates compliance with the Domestic Crude Oil Supply Obligation to local refineries.
Nigeria has no excuse to default in either commitment. Its crude oil production has vacillated between 1.2 million and 1.5 million barrels per day since President Bola Tinubu assumed office last year; below its OPEC production quota. It is an incongruity sustained by official corruption and massive oil theft. Sanity can only prevail with the reversal of this state of affair.
It is hard to believe that the same government agencies that embraced the Dangote Refinery with a lot of enthusiasm in 2021, as consummated in the purported 20 per cent equity stake in the refinery in 2021, upon satisfaction that it would save Nigeria 30 per cent of its annual forex expenditure on fuel importation, have turned around to vilify it. A subversion of this gain, therefore, by any act of omission or commission, will not be in the best interest of the country. The cost of fuel importation exerts pressure on the naira and the economy and Nigerians are the worse for it.
Sadly, the Ministry of Petroleum shut the stable door after the horse had bolted when its Minister of State, Heineken Lokpobiri, hosted a recent meeting with the Chief Executives of NMDPRA, Nigeria Upstream Petroleum Regulatory Commission's (NUPRC), NNPCL and the Dangote Group, in a seemingly fence-mending mission. How redemptive that meeting was, with Dangote's fresh salvo shortly afterward, is anybody's guess. Some unnamed public sector oil operators, he alleged, have a blending plant in Malta. This is a grave allegation, which the EFCC should compel him to provide evidence for action to be taken on, if true. Dangote has also offered his stake in the refinery to government as a buyout, to end the controversy.
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With the President as the substantive oil minister, he cannot continue to remain insular on this matter. The fact that he travelled around the globe recently, lobbying investors with assurances of a ready friendly investment climate, makes his open intervention in this matter all the more urgent.
Undoubtedly, what the Dangote Refinery would contribute to the economy is huge. This could be seen in its impact in making Jet A1 and diesel available and crashing their prices. A litre of diesel which sold for N1,900 last year was reduced to about N1,000 early this year. It has now stabilised at about N1,200 per litre.
More than anything else, the altercations have inadvertently exposed why all the efforts to fix its refineries always hit the rock. A former Minister of State for Petroleum, Ibe Kachikwu, was so impulsive about the successful turnaround maintenance (TAM) of the refineries that he swore to resign if that was not achieved. But painfully, he later realised that the task was like digging a sinking hole: "It got to a point where I started wondering whether as we repair this, somebody was going out there to destroy so that contracting will be done."
Apparently, some elements who reap from the status quo want it to continue - of a major OPEC member-nation embarrassingly importing refined petroleum products it could produce at home. Dangote's refinery will buck the trend with all hands on deck. Besides, 33,000 personnel are already in its employ even as it is yet to become fully operational, a great percentage of who are Nigerians. Its projected annual revenue of $21 billion in terms of forex earnings is massive. This is in addition to its production of "raw materials for a wide range of manufacturers in the plastic, pharmaceuticals, food and beverages, construction."
President Tinubu should, therefore, see the bigger picture and arrest this ugly drift, given its likely effect as a red flag to foreign direct investments. Some, in situ, already are divesting.
