In November 2013, then Petroleum Minister, Mrs. Diezani Allison-Madueke, hinted about the possibility of selling Nigeria’s four oil refineries as a way of divesting government of managing such infrastructure and also getting them back to functionality through private sector management. She said in an interview with Bloomberg TV that “we would like to see major infrastructural entities such as refineries moving out of government hands into the private sector”. The basic reason she gave for the plan was that “government does not want to be in the business of running major infrastructure entities and we haven’t done a very good job at it over all these years”.
In furtherance to this, the minister hinted that the refinery at Port Harcourt would be ready for sale in the first quarter of 2014. To this end, she stated that the turnaround maintenance (TAM) of the refinery must be ready by end of December 2013. To show government’s seriousness for the sale, the Bureau for Public Enterprises (BPE), in a statement signed by its spokesman, Chigbo Anichebe, disclosed that President Goodluck Jonathan had already set up a technical committee for the sale. The statement read: “in furtherance of the economic reform programme of his administration, President Jonathan has approved the commencement of the privatization of the nation’s four refineries by BPE.”
According to BPE, “The president has also approved the constitution of a steering committee on the privatization process that involves all relevant stakeholder ministries and agencies”. The technical committee had the Petroleum minister, the Finance minister, the Ministers of Power; Labour and Productivity, National Planning; Mines and Steel Development as well as the Attorney General of the Federation as members. A source at the Petroleum ministry also told Daily Independent at the time that the “federal government hopes to begin privatization of all four refineries in Kaduna, Warri and Port Harcourt next year (2014), the reason it insisted that Port Harcourt refinery must be ready for this process before the year ends”.
What followed these disclosures was a barrage of protests against the plan. Petroleum workers and other workers unions took to the streets to protest the plan. A nationwide strike was called at the instance of National Union of Petroleum and Natural Gas workers (NUPENG). Opposition politicians (those now leading the country), also saw in the decision opportunity to score political points. They hunted government of the day with allegations and counter allegations. They instigated protests and refused to accept any explanations, economic and political, as to why it had become inexpedient for government to keep managing the refineries. Crux of the protests was that selling the refineries will lead to complete removal of subsidy on petrol and therefore an increase in the pump price of petrol and subsequently, inflation. NUPENG also argued that it would lead to job losses.
Appearing before a National Assembly committee to defend the budget of the petroleum ministry in May 2014, Mrs. Allison-Madueke insisted that government still intends to sale the refineries. She also clarified that the plan was however “suspended due to pressure from workers who protested early this year”. And with the change of government in 2015, the plan was stalled.
About November 2015, Group Managing Director (GMD) of the NNPC (as he then was), Dr. Ibe Kachukwu, addressing senior media executives at his maiden meeting with them in Lagos, hinted on the possibility of selling off the refineries ‘as they are’. He told the media executives that if by the end of January 2016 the refineries do not survive “a stress test”, they would be sold. Some of the media executives wondered why maintaining four refineries had become a herculean task for Nigeria with its array of petroleum engineers and experts. Some other expressed opinions in support of selling the refineries in so far as the sale process was transparent.
Kachukwu explained that the refineries had become outdated technologically and as such may no longer operate optimally. He also disclosed that even the OEMs (Original Equipment Manufacturers), who produced machines installed at the refineries, had been invited to help revitalize them. They could not. Reason: the technology has become obsolete and no longer in manufacture. This means that even spares to replace worn out parts are no longer in the market. Economic implication of the disclosure was that pumping more money into seeking to make the refineries work optimally as when they were first installed, was akin to seeking to fill a bottomless pit. As a matter of fact, the world of petroleum engineering had moved away from petrol refining technology of the 1980s. Modular refineries which are more compact and run with latest technology are more in vogue. Government is also aware that Dangote Refinery in Lagos state is being built using technology that is different from what it has in its four refineries. It did not however, occur to our government that refining technology has moved away from what it used to be.
However, there was information that Kachukwu had indeed recommended the sale of the refineries “as they are”, but his successor, Maikanti Baru (now late), thought otherwise. Some of his initial promises, upon appointment, were to ensure that the refineries were returned to optimum functionality. His successor, Mele Kyari, also sang the same song promising to bring all the refineries back to life by 2023. Both men seem to key into the mindset of the Minister of Petroleum, who is said to insist that the refineries are of cenotaph importance that no one needed recommend selling them. Instead of seeing them for what they truly are: relics of profligacy, the government saw them more from patriotic lens. Today, the NNPC posts some N1.6 trillion losses from just three of the refineries. This amount was published by NNPC itself from its audit and financial statement. N1.6 trillion lost between 2014 and 2018 in the bid to patriotically protect monuments that had outlived their economic use. A breakdown showed that Port Harcourt and Kaduna refineries lost N208.6 billion in 2014, N252,8 billion in 2015, N290.6 billion in 2016, N412 billion in 2017 and N475 billion in 2018. According to findings by PremiumTimes “the bulk of the losses were from operating costs and administrative expenses accumulated by the companies despite that some have since been shut down or operating at grossly below installed capacities”.
No serious minded business entity will post losses such as these and still smile. In fact, it will file for bankruptcy. The only business entity that can post such losses and is still not bothered is FGNigeria Plc. This is because despite these postings, the managers of FGNigeria Plc are still talking of pouring more money into the refineries before considering selling them. That is unconscionable. But they are not to blame. They are free to so ‘invest’ because shareholders of FGNigeria Plc rarely ask questions, or demand to know, how well their company is doing. How else does anyone explain that Kaduna refinery did not post any income in all of 2018, yet, its financial obligations, recurrent and capital, were met? That is simply a statement on the fact that government is sustaining those relics for reasons of patronage.
To cure further losses and save money for other equally important needs, this may be the time to sell the refineries ‘as they are’. As it is, Nigeria imports more petroleum products than it refines. So, what economic sense does it make to keep funding TAM of the refineries, which Baru alleged had not actually happened in more than 20 years, when they serve no purpose other than guaranteeing the salaries and allowances of some Nigerians even when they are not productive? N1.6 trillion is too princely a sum to loose over four years.