“The record of previous TAM is not inspiring. Government has to tell us how it will be done differently to give confidence that this is not an opportunity to fund the next general elections.” Sam Amadi
“$1Billion can build a low capacity refinery from scratch to finish… The Nigerian government is being imprudent by investing over a billion dollars merely for a Turnaround Maintenance of an out-dated refinery.” Silas Joseph Onu
“If government has spent a cumulative $25bn in 25 years on the turnaround maintenance and rehabilitation of these drainpipes called refineries without anything to show for it, does it make economic sense to continue to throw scarce resources at them again?” Jide Ojo
The Federal Executive Council (FEC) recently approved $1.5 billion (about N600 billion) for the rehabilitation of the Port Harcourt refinery. Approval has also been given for the rehabilitation of both Warri and Kaduna refineries to the tune of $1.484 billion. Meanwhile a 20 per cent minority stake in Dangote Petroleum and Petrochemical Refinery will be acquired for $2.76 billion.
The only challenge is that about N3.8 trillion has been poured into Nigeria’s four derelict petrochemical refineries without any result being recorded. Notwithstanding, that between 2015 and 2020, about N1.47trn was spent by the federal government in maintaining, revamping and running the four broken-down refineries to no avail, approval has been given for an additional N2.35trn to be spent on rehabilitating the same refineries. Talk about doing the same thing over and over and expecting different results.
Official reports by Nigerian National Petroleum Corporation (NNPC) disclosed the refineries lost N123.25bn between January and October 2019. While Kaduna Refining and Petrochemical Company (KRPC) posted a loss of N49.3bn, Port Harcourt Refining and Petrochemical Company (PHRC) along with Warri Refining and Petrochemical Company (WRPC) lost N36.7bn and N37.24bn, respectively.
While a large segment of Nigerians expressed outrage over the humongous waste, government appears to have turned deaf ears. But then, some experts made a case for the refineries’ refurbishment.
Dr. Sam Amadi, a former Chairman of the Nigerian Electricity Regulatory Commission (NERC) and Associate Professor at Baze University, Abuja said the idea of funding turnaround of the existing refineries may mean that government is walking back on its agenda of deregulating the sector and allowing private sector lead. He also questioned the justification for government’s plan to buy shares from Dangote when the billionaire has bragged of capacity to fully finance the project.
Expressing doubts over the venture, Dr. Amadi said: “The federal government’s recent action or proposed actions in the oil and gas sector suggests a high degree of lack of coherence and consistency in policy management. The record of previous TAM is not inspiring. Government has to tell us how it will be done differently to give confidence that this is not an opportunity to fund the next general elections.
“The objective of the oil and gas sector reform is liberalization and privatization. There is there no basis for investment in the Dangote refinery. If the reason is to ensure energy security, then the government should have focused on how to make the price affordable not on buying shares which Dangote has capacity to raise through private market. It is a misplaced move that smacks of some windfall for Dangote. If government says it does not want to own refinery, why buy shares from Dangote when Dangote himself has boasted of capability to fully finance the project? This is neither wise of ethical. It is an inappropriate commingling of private and public finance.”
Abuja lawyer and Co-Convener, Open Bar Initiative, Silas Joseph Onu described the entire exercise as wasteful and insincere.
“Generally speaking, with modern technology, building a complex, hydrocracking, hyrdroskimming, catalytic cracking refinery, can cost anywhere between 5-15 billion USD depending on the capacity of barrel to be produced per day. The throughput (processing capacity) of this refinery should be between 250-500,000 barrels per day. It is therefore, safe to say that even with $1Billion, a low capacity refinery can be built from scratch to finish. It follows that the Nigerian government is being imprudent by investing over a billion dollars merely for a Turnaround Maintenance of an out-dated refinery. This is akin to throwing the said maintenance money in a hole. It is totally wasteful and insincere.
“The investment in Dangote refinery is an indication that the government is actually not interested in making these national assets functional. Ordinarily, a private company should attract investment from the private sector and other individuals who believe in the said project. So, I don’t trust this government’s reasons for such a venture. In any case, before such an investment can be done legally. The National Assembly must appropriate for it and all the tiers of government must also be involved as the constitution of Federal Republic of Nigeria already stipulates how our national income is to be managed in the consolidated account. Therefore, who authorized NNPC to take our collective money and invest in a private business? This is impunity and I condemn it.”
Stephen Azubuike a partner at Infusion Lawyers observed that it might be difficult to dissociate corruption from the enterprise. “Truth is, in one breath, one could reckon with the apparent effort of this Government regarding the refineries as perhaps, Government’s genuine attempt to revamp our refineries. But on more critical look, failure of the TAMs and Government posture seems like flogging a dead horse. Knowing what obtains in Nigeria in terms of the notoriety of corrupt practices, it is difficult to dissociate corruption from the base.”
Media Consultant and Public Affair Analyst, Tony Eluemunor posited that: “If the Buhari administration wanted to repair the refineries, it would have started immediately it came into power. Yes, Ibe Kachikwu, former Petroleum Minister wanted to repair the refineries but got sacked for his efforts. There is a reason behind this new effort. But it’s not so that they will refine crude petroleum. The reason has not been made public.”
Another Public Affairs Analyst, Jide Ojo shared his views. “The Federal Executive Council chaired by the President, Muhammadu Buhari on Wednesday, March 17, 2021, approved the sum of $1.5bn, about N575bn, for immediate commencement of rehabilitation work on the largest refining company in the country, the 32-year-old Port Harcourt Refinery. “The Guardian report of March 18, 2021 titled, ‘After $25bn on maintenance, FEC approves new $1.5bn for PH refinery’ offered some historical perspectives on the operations of the refineries in Nigeria. It said the Port Harcourt refinery, which began operation in 1989, remains the largest refining company in Nigeria, until the time the Dangote refinery in Lagos will be activated in 2022.
“At inception, it had a capacity to process 150,000 barrels of crude a day and was later upgraded to 210,000 barrels per day. The refinery has been repaired innumerable times, under various Turnaround Maintenance contracts that had gulped huge amounts. The report noted further that, ‘…Nigeria has spent about $25bn in turnaround maintenance of refineries in the past 25 years, the prevailing development is coming after promises by the administration that the government would no longer spend on the facility. Previous rehabilitations notwithstanding, the Nigerian National Petroleum Corporation audit report had last year revealed that three of the nation’s four refineries recorded N1.64 trillion cumulative losses in their 2014 to 2018 details.’ This is heart-rending!
“If the above information of gargantuan losses incurred by the refineries is true, does it make sense to pump another $1.5bn on the Port Harcourt refinery? If government has spent a cumulative $25bn in 25 years on the turnaround maintenance and rehabilitation of these drainpipes called refineries without anything to show for it, does it make economic sense to continue to throw scarce resources at them again? To my own mind, what the Federal Government has decided to do to the Port Harcourt refinery as well as others is completely nonsensical, illogical, uneconomical, and whimsical.
“Instead of pumping another $1.5bn to revitalise Port Harcourt refinery, what I think government should have done is to incentivise more private sector players to invest in the downstream sector of the petroleum industry so that healthy competition as was witnessed in the telecommunication sector will ensure that Nigerians are not ripped off but rather get value for their money. One of the ways government can encourage private investors into the oil and gas sector is to allow for cost reflective price. Guided deregulation or price fixing by government is patently counterproductive and the reason for payment of the fraudulent petrol subsidy. Luckily, the long awaited Petroleum Industry Bill has been passed by the National Assembly, though awaiting the president’s assent.”
Likewise, Lekan Ojo, a policy analyst submitted that government’s management of any resource had always been catastrophic. “More so, the Nigerian government has even been beyond grossly incompetent in management of things. This can easily be considered as billions down the drain,” he said.
However, the Group managing Director of NNPC Mele Kolo Kyari insists that the public got it all wrong. “For the Dangote Refinery, we are not taking government’s money to buy it, which is the mistake people are making. We are borrowing on the back of the cash-flow of this business,” he said.
Moreover, Mr Muda Yusuf, an economist and immediate-past Director General of the Lagos Chamber of Commerce and Industry (LCCI), said the Dangote Refinery was of strategic national importance. “My views have always been that even though this is a private sector project, it makes both commercial and nationalistic sense for NNPC to express interest in it. This project has a good prospect to put an end to fuel importation and the associated leakages of public funds while also preserving our foreign exchange reserves.
“The proposal by NNPC to take 20 per cent equity stake in the Dangote Refinery is a move in the right direction. The reality is that the Dangote refinery is a project of significant and strategic national importance, even though it is promoted by the private sector. Taking a stake in the project also makes a great deal of business sense, especially given how far the project execution has gone and our heavy dependence on importation of petroleum products.
“It also makes both commercial and nationalistic sense for NNPC to express an interest in a project that has a good prospect to put an end to fuel importation and the associated leakages of public funds,” he said.
The LCCI DG further stated that the model being proposed with the Dangote refinery was similar in a way to the Nigeria Liquefied Natural Gas (NLNG) Limited’s model, which according to him, remains the best example of how government funds should be invested.
In the same vein, Mr. Wilson Opuwei, Chief Executive Officer, Dateline Energy Services Limited, said the approval was a step in the right direction for the country. According to Opuwei: “It makes sense for the NNPC to invest in ventures that will bring returns to the company. Every business needs good investments and this is what the NNPC is doing with the Dangote Refinery.”
